Pueblo Viejo contract to deliver further benefits to state - DR

Final amendments to Canadian miner Barrick Gold's (NYSE, TSX: ABX) contract for the Pueblo Viejo gold-silver mine in the Dominican Republic will secure additional benefits to the state, according to a government statement. The agreement, signed by state officials and mine operator Pueblo Viejo Dominicana Corporation, a 60:40 JV between Barrick and compatriot Goldcorp (TSX: G, NYSE: GG), will see the state receive a greater share of revenues over the life of mine than envisaged in a preliminary agreementin May, the statement on the president's website said. In particular, under the terms of the contract the government will not recognize investments in the project totaling US$682mn, or 14.2% of total investments and accumulated losses, resulting in a "significant increase" in income for the state. The mine's owners will also be required to pay US$36.4mn taxes for exports between November 13 and December 31 last year and US$73.1m capital gains tax relating to the sale of former mine owners Placer Dome República Dominicana, acquired by Barrickin 2006, the statement said. Under the contract the government will receive about US$11.6bn during the life of the mine, equivalent to 51.3% of gross profits, compared to 37.1% previously anticipated. However, the figures assume an average gold price of US$1,600/oz. Gold closed at US$1,387/oz on the London Bullion Market on Friday (Sep 6), down US$2/oz from the previous day, with the August average at US$1,347.09/oz. The contract will also see the government begin to receive revenues from the operation immediately, rather than once the mine's owners have recouped their initial investment as originally planned, with the state expected to receive US$1.28bn in 2013-2016, at US$1,600/oz gold prices. "This second amendment not only guarantees terms announced in the preliminary agreement in May but also increases the benefits and guarantees offered to the state and the Dominican people," minister of the presidency Gustavo Montalvo said. AGREEMENT "PRESERVES ECONOMIC VALUE" - BARRICK Barrick is "pleased to reach an agreement that preserves the economic value of the Pueblo Viejo mine, while also addressing the fiscal objectives of the country," the company told BNamericas in an emailed statement, with the contract providing "stability for both parties moving forward." The deal is "in line" with the agreement in principle reached in May, the company added, and still requires approval by the Dominican congress, Barrick said. The debate over the mining contract came to head in February when President Danilo Medina called the terms "unacceptable" due to higher gold prices, and demanded the contract be modified, threatening a windfall tax if no agreement could be reached. Barrick's share of 2013 production at Pueblo Viejo expected to be 500,000oz-600,000oz at all-in sustaining costs of US$525-US$575/oz. Production at the mine contributed to a 1.6% rise in the Dominican Republic's GDP in the first half of the year, according to a reportby the country's central bank in August.