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Bill rendering Navidad project uneconomic won't pass as is - Pan American CEO

Bnamericas Published: Saturday, November 10, 2012
Pan American Silver (TSX: PAA, Nasdaq: PAAS) CEO Geoff Burns expects changes to be made to draft legislation in Chubut province that would render its Navidad silver project uneconomic. Investment in the project was frozen in June after a draft law was submitted by Chubut governor Martin Buzzi that would reverse a ban on open pit mining - also necessary for Navidad to advance - but proposes increased financial requirements on mining operations. "I still don't think the draft legislation as it was presented in June is going to pass," Burns said in a conference call to discuss Q3 results. "There will be some modifications and we just have to be patient and let the political process work and evaluate our final steps when the legislation is passed... I believe that might well happen before the end of this year." The draft legislation proposes an additional 5% net smelter return royalty in favor of the province (on top of an existing 3% NSR), plus a requirement that at least 4% of total sales and 7% net pre-tax profit goes to province-owned resource company, Petrominera. Coupled with high inflation, plus a 10% export duty on concentrate sales and 35% income tax rate payable to the federal government, the proposed legislation would render Navidad uneconomic at "any reasonable estimate" of long-term silver prices, Pan American said in July. A mineral resource estimate from April 2009 showed measured resources of 15.4Mt at 177g/t silver equivalent, indicated resources of 139.8Mt at 147g/t and inferred 45.9Mt at 97 g/t. "It is an amazing deposit and I know that we will have a chance to unlock its value one day but for the moment it is stalled," Burns added. Pan American also has mines and projects in Mexico, Bolivia, Peru and the US.

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