R/€ = 15.00
R/$ = 10.82
Au 1368.64 $/oz
Pt 1473.50 $/oz
Sep 10, 2002
Chile copper-mine conflict drags onBack
Enami|Exxon Mobil|UBS Warburg|Bahamas|Bermuda|Chile|United States|USD|Copper Producer|State-owned Miner|Chile's Government|Alfonso Dulanto|Jorge Lavandero|Ricardo Lagos|Disputada
© 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
Other Mining News
Controversial changes to South Africa’s mineral laws have been passed in the National Assembly, despite warnings that they could deter investors and damage the country’s mining and energy industries. The Mineral and Petroleum Resources Development Act Amendment...
The Chamber of Mines (CoM) on Thursday said it generally welcomed and supported the approval of the Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill by Parliament on Wednesday, stating that it believed that significant progress had been made in...
Updated 1 hour 12 minutes ago Significant preparatory work and construction have begun on Phase 2 of the Lesotho Highlands Water Project (LHWP), with a panel having been established to select the members for an Independent Oversight Committee (IOC) to review, maintain and monitor the integrity of...
Recent Research Reports
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
Road and Rail 2013: A review of South Africa's road and rail infrastructure (PDF Report)
Creamer Media’s Road and Rail 2013 Report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Liquid Fuels 2013 (PDF Report)
Creamer Media’s 2013 Liquid Fuels report examines South Africa’s liquid fuels market, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing,...
This Week's Magazine
Electricity Supply Corporation of Malawi (Escom) is inviting expressions of interest from eligible firms for the supply and install automatic fire suppression systems in the cable tunnels at its Nkula B and Tedzani power stations, on the Shire river. Escom will...
Lubricant company Castrol will provide lubricants, brake and hydraulic fluids for use in the Bloodhound supersonic car (SSC). The 1 600 km/h car, which will attempt to break the land-speed record in 2015 through to 2016, is being constructed in Bristol, in the UK.
State-owned electricity producer Eskom and government are assessing ways to secure the financial resources necessary to enable the utility to resume power-saving schemes, as well as to contract with those municipalities and independent power producers (IPPs) able to...
Diversified industrial engineering group PSV’s subsidiary African Cryogenics is gearing up to increase its operating capacity through an investment into a 7 000 m2 manufacturing facility, which is under construction and expected to be completed at the end of this...
Freight and logistics service provider Grindrod has a R10-billion project pipeline planned for sub-Saharan Africa, says Grindrod CEO Alan Olivier. He says the capital expenditure for some of these projects has already been approved by the Grindrod board –...