R/€ = 13.38
R/$ = 12.26
Au 1189.96 $/oz
Pt 1105.00 $/oz
Sep 10, 2002
Chile copper-mine conflict drags onBack
© Reuse this Chile's mining minister said last week there has been no progress in talks with Exxon Mobil, over government demands that the company pay taxes on its planned $1,3-billion sale of mining assets.
Exxon and Chile's government clashed after the US giant agreed in May to sell its copper mining unit, Disputada de las Condes, to South African miner Anglo-American, in an offshore transaction that would be exempt from the country's capital gains tax.
Chile, the world's top copper producer, wants Exxon to pay taxes on the profits from the sale.
The tax could be anywhere between $30 and $300-million.
The government of socialist President Ricardo Lagos also wants Exxon to recognize an option held by state-owned miner Enami to buy back up to 49% of Disputada.
Enami acquired the option in 1978 when it sold Disputada to Exxon for $98-million.
Both issues have held up the Exxon-Anglo deal.
"I would say there are no advances that I could tell you of, other than that conversations continue on both issues," Mining Minister Alfonso Dulanto told reporters last week.
Dulanto, who met top Exxon executives a week ago, said he was optimistic, but that an agreement could take some time. "Clearly, our intent is to bring the results of these talks to the (Chilean) president as soon as possible," Dulanto said.
Exxon has declined to comment on the talks.
The company has been at the hub of a controversy in Chile in recent weeks over the tax obligations of foreign mining companies.
The country holds 40% of the world's reserves of the metal, and copper is a key income generator for the state.
In the past decade, eight of the largest 10 foreign mining companies in the country have not paid income tax, according to a government study.
The average annual profit ratio among these companies was 15,8% from 1997 to 2001, it said.
Exxon's Disputada has declared financial losses during its 24 years of operations in the country and therefore has never paid income tax.
Critics allege that local units of multinationals like Exxon elude Chilean taxes by taking out debts at above-market rates with sister subsidiaries based in tax havens, such as Bermuda and Bahamas.
Interest payments and other tax loopholes artificially depress their earnings reports, they say.
"I don't think anyone can believe that a company like Exxon would hold onto a bad business for 24 years because that would mean they came here to do charity work," Senator Jorge Lavandero said.
Chile has received $16-billion in direct foreign investment in mining in the last 10 years.
President Lagos has rejected proposals for a royalty tax on copper production, but is seen as wanting current tax rules to be more strictly enforced.
Analysts say the outcome of the Chile-Exxon controversy could be more transparent tax planning by miners in Chile and slightly higher costs in the long run.
"We think the debate over royalties and the investment platform bill will serve to catalyze the industry into being less aggressive in future tax planning, and to seek ways to build a more positive industry image among the populace," UBS Warburg said in a report this week. – Reuters.
Edited by: Martin Czernowalow© Reuse this Comment Guidelines (150 word limit)
Other Mining News
After decades of undersupply, mining engineering graduates are now struggling to find employment. Even more surprising, writes Professor Emeritus Huw Phillips in the latest edition of the Journal of the Southern African Institute of Mining and Metallurgy (SAIMM), is...
JSE-listed Trans Hex on Monday posted a surge in earnings for the financial year ended March 31, as the South African operations recovered from losses in the prior year. The group recorded a R190.5-million profit for the year, a significant increase from the...
Turkish floating power plant group Karpowership says it has identified several potential sites along South Africa’s coastline where it could berth or moor vessels with generating capacities of up to 500 MW, indicating that the sites are generally located near load...
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
This Week's Magazine
While strongly welcoming the promulgation of the new Part 101 of South Africa’s civil aviation regulations, governing the commercial operation of civil remotely piloted aircraft (RPAs) in South Africa, the Commercial Unmanned Aircraft Association of Southern Africa...
LSM Distributors has contracted engineering consultancy WSP | Parsons Brinckerhoff Africa to undertake the R100-million restoration of the 54-year-old Kyalami racetrack, situated in Midrand. The restoration will assist in re-establishing it as a venue for...
South African Defence Minister Nosiviwe Mapisa-Nqakula has expressed the hope that the defence budget will be significantly increased over the next five years. She did so while addressing the media in her recent budget vote media briefing. The 2015/2016 defence...
The African Development Bank (AfDB) has been an implementing agency for the Global Environment Facility (GEF) since 2008. The relatively young portfolio has 28 projects over 30 countries on the continent according to the 2014 AfDB and GEF annual report released...
Investment in South African youth through apprenticeships and learnerships will not only create direct benefits for businesses but will also contribute significantly to job creation and socioeconomic transformation in the country.