Chile Tax May Cost BHP, Rio, Anglo Extra $1.2 Billion (Update1) -Shanghai Metals Market

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Chile Tax May Cost BHP, Rio, Anglo Extra $1.2 Billion (Update1)

Industry News 09:01:04AM May 14, 2010 Source:SMM

May 13 (Bloomberg) -- Chile's proposed mining tax increase may cost companies including BHP Billiton Plc, Xstrata Plc and Anglo American Plc an additional $1.2 billion in the next two years as the world's largest copper-producing nation seeks to finance repairs following a February earthquake.

The increase would add to about $12 billion mining companies will pay in taxes to Chile's government this year, Alberto Salas, president of the country's National Mining Society, said in an interview last night in Cartagena, Colombia.

President Sebastian Pinera is seeking more tax revenue from mining companies following a magnitude-8.8 earthquake and tsunami on Feb. 27 that killed hundreds of residents, destroyed homes and damaged highways and ports. Governments from Brazil to Australia are also after a greater share of revenue from surging demand for metals.

"There is some consensus that companies depleting resources need to pay more money," said Cesar Perez-Novoa, a managing director at Santiago-based brokerage Celfin Capital SA who has researched metals markets since 1995. "In Chile, the earthquake is just accelerating the process."

Australia, the world's largest iron-ore exporter, said May 2 it plans to introduce a 40 percent tax on natural-resource profits starting in 2012 to raise A$12 billion ($10.8 billion) in the first two years. Brazil, the second-biggest exporter of the steelmaking mineral, is considering raising royalties on mining to about 6 percent of sales from the current 0.2 percent to 3 percent.

Above Estimates

Higher copper prices may lead revenue from the Chilean tax plan to surpass the government's estimate of $700 million in 2011 and 2012, Salas said. The government said companies that choose to pay the additional tax will have tax rates guaranteed until 2025, which is an incentive for companies planning expansions and new projects, Salas said.

A global surplus of copper this year probably will lead the price of the metal to decline in the last six months of 2010 before rebounding in 2011, Salas said. Global copper stockpiles this year may rise to 1 million tons, he said.

Copper has jumped 59 percent in the past year. Futures for July delivery gained 1.5 cents to $3.2345 a pound at 12:58 a.m. on the Comex in New York.

Mining companies plan to invest $48 billion in Chile through 2017, when the nation's copper output will surge to 7.7 million metric tons from about 5.8 million tons this year, he said. Chile's copper deposits include BHP-controlled Escondida, the world's biggest copper mine. Rio Tinto Group is also a shareholder of the mine.
 

Chile Tax May Cost BHP, Rio, Anglo Extra $1.2 Billion (Update1)

Industry News 09:01:04AM May 14, 2010 Source:SMM

May 13 (Bloomberg) -- Chile's proposed mining tax increase may cost companies including BHP Billiton Plc, Xstrata Plc and Anglo American Plc an additional $1.2 billion in the next two years as the world's largest copper-producing nation seeks to finance repairs following a February earthquake.

The increase would add to about $12 billion mining companies will pay in taxes to Chile's government this year, Alberto Salas, president of the country's National Mining Society, said in an interview last night in Cartagena, Colombia.

President Sebastian Pinera is seeking more tax revenue from mining companies following a magnitude-8.8 earthquake and tsunami on Feb. 27 that killed hundreds of residents, destroyed homes and damaged highways and ports. Governments from Brazil to Australia are also after a greater share of revenue from surging demand for metals.

"There is some consensus that companies depleting resources need to pay more money," said Cesar Perez-Novoa, a managing director at Santiago-based brokerage Celfin Capital SA who has researched metals markets since 1995. "In Chile, the earthquake is just accelerating the process."

Australia, the world's largest iron-ore exporter, said May 2 it plans to introduce a 40 percent tax on natural-resource profits starting in 2012 to raise A$12 billion ($10.8 billion) in the first two years. Brazil, the second-biggest exporter of the steelmaking mineral, is considering raising royalties on mining to about 6 percent of sales from the current 0.2 percent to 3 percent.

Above Estimates

Higher copper prices may lead revenue from the Chilean tax plan to surpass the government's estimate of $700 million in 2011 and 2012, Salas said. The government said companies that choose to pay the additional tax will have tax rates guaranteed until 2025, which is an incentive for companies planning expansions and new projects, Salas said.

A global surplus of copper this year probably will lead the price of the metal to decline in the last six months of 2010 before rebounding in 2011, Salas said. Global copper stockpiles this year may rise to 1 million tons, he said.

Copper has jumped 59 percent in the past year. Futures for July delivery gained 1.5 cents to $3.2345 a pound at 12:58 a.m. on the Comex in New York.

Mining companies plan to invest $48 billion in Chile through 2017, when the nation's copper output will surge to 7.7 million metric tons from about 5.8 million tons this year, he said. Chile's copper deposits include BHP-controlled Escondida, the world's biggest copper mine. Rio Tinto Group is also a shareholder of the mine.