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Primero Mining to fight Mexico tax claim

Bnamericas Published: Thursday, February 04, 2016
Primero Mining to fight Mexico tax claim

Mexico's tax authority SAT is seeking to nullify an agreement allowing Primero Mining to pay taxes on realized silver prices at its San Dimas mine.

Primero sells the bulk of silver produced at the Durango state primary gold operation to Silver Wheaton at US$4/oz under a streaming agreement.

An advance pricing agreement (APA), signed by SAT in 2012, allows Primero to pay taxes on the US$4/oz realized price, rather than spot prices, currently around US$14/oz.

The agreement was seen as a significant step forward for Primero, enabling the company to generate and reinvest cash at San Dimas, which is currently being expanded.

But subsidiary Primero Empresa Minera has received a legal claim from SAT seeking to annul the APA. No alternative basis for paying taxes was given in the claim, Primero said.

"The company believes this legal claim is without merit and it intends to vigorously defend the validity of its APA," it added. Operations continue as normal at San Dimas.

NO LEGAL PRECEDENT

Primero's legal and financial advisors say SAT's legal challenge is without precedent. Seeking to nullify an APA undermines its function to assure a taxpayer of certainty, the company said.

Any challenge to tax rulings cannot result in retroactive consequences or payments levied against a taxpayer that obtained the ruling in good faith within applicable legal principles according to a recent Mexican supreme court ruling, it added.

Primero also has the Cerro del Gallo project in Mexico and the Black Fox mine in Canada.

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