Mexico miners to face 57% tax burden if charges approved - Almazán

Mexican miners would see their total tax burden rise to 57% if proposed charges are approved, Sergio Almazán, president of the country's mining chamber Camimex told local daily Milenio.

The government plans to impose a 7.5% tax on sales from mining activities and an additional 0.5% on gross revenues from silver, gold and platinum mines as part of its tax reforms.

Coupled with changes to mining concessions, the proposals will translate to an increase in total taxes from 40% currently to 57% if given the green light by the senate, Almazán was quoted as saying. The plans have already won approval in the lower house.

Mexico is one of the few mining jurisdictions not to charge a royalty or additional tax on mining production or profits, with companies paying general corporate taxes, per-hectare fees for mining concessions and a share of profits to workers.

If the additional taxes are approved, investment in the sector between 2013 and 2018 will shrink from US$30bn to US$12bn, Almazán added.

MINERA FRISCO MOST AFFECTED

Among the major Mexican miners, those with a greater proportion of production within the country and a greater focus on gold and silver would be hardest hit in 2014 if the taxes are approved, according to research by Monex.

With 100% of its producing mines in Mexico and 69% of sales coming from gold and silver, Minera Frisco (BMV: MFRISCO) would be hardest hit, with 7.8% wiped off its Ebitda next year, Monex said.

Industrias Peñoles (BMV: PE&OLES) and 75%-owned subsidiary Fresnillo (LSE, BMV: FRES), which also have a focus on precious metals and 100% mining production in Mexico, would see a 7.5% hit to Ebitda, the same as Minera Autlán (BMV: AUTLAN), which produces manganese and ferroalloy products solely in Mexico.

Due to its diversified nature, with operations in infrastructure and transport and with mining activities in Peru as well as Mexico, Grupo México (BMV: GMEXICOB) would be the least affected, at 2.7%, Monex said.