Tuesday, January 22, 2008

Argentina's Attack on Mining Symptomatic of a Wider Problem - an out of control mining industry?

LONDON (ResourceInvestor.com) -- Argentina’s decision to go back on its word and slap the mining industry with export duties it said they would be exempt from smacks of opportunism; the perception is that with higher commodity prices, the industry can afford it.

(That is contradicted by: Ransacking Chile - Fabulous Profits for Multinationals, Chile Copper Boom - Cui Bono? - Who Benfits? )

But mining companies today are being squeezed not just by governments, but by NGOs, local communities and of course a rising cost base, particularly where the construction of new mines is concerned.

Previously thought of as a comparatively attractive destination for mining investment, Argentina is imperilling (ensuring) the benefits that it could derive as a relatively stable, well mineralised country during a commodities boom.

Argentine law is supposed to guarantee mining companies a stable tax burden on a project for a period of 30 years from the time a feasibility study is submitted to the government. Instead, the country is hoping to impose on miners export duties understood to be in the range of 5%-10%; export duties they felt assured of exemption from when they made investment decisions.

Regarding Taxes:

As a bonus, Canada has tax loopholes that benefit companies incorporated in Canada, with operations abroad. To avoid the possibility of double taxation, companies are assumed by the government to be paying taxes in the countries in which they operate. But because many companies make arrangements with host countries not to pay taxes there either, they don't pay taxes anywhere.

10 Things Canada Does Best - What Canada doesn't do best is hold domestic mining companies accountable for the damage they do abroad.
, Possible Tax Evasion? Under-declaration of profits by mining companies costs Tanzania US$207 million )

Governments have a responsibility to foster industrial development by providing a stable fiscal environment free from this sort of danger. Of course, no government in the world can be relied upon to remember this all the time, but some do a better job than others.

(The pro-mining governments of Papua New Guinea (PNG) and Guatemala for example:

Unregulated Gold Miners – Environmental Stewards or Criminals? Not a single mine in Papua New Guinea has a Tailings Dam

Mining Misery: Guatemala is one of many countries that has attracted the investment of Canadian Mining Companies – but at what cost to its people?

It doesn’t help that mining has an image problem. Countless groups of environmental busybodies, usually with scant scientific legitimacy or even approval from the local communities most directly affected, dedicate themselves to besmirching the industry and opposing projects.

(Local communities love heavy metals in their drinking water: Ok Tedi Environmental Disaster

Supreme Court Decision Rattles Canadian Mining Industry – Right to Pollute Under Threat – Teck Cominco Execs Vow Fight, say No to Cleaning Environment )

Unfortunately, community relations programmes and corporate social responsibility initiatives cannot be relied upon to fully counteract the efforts of those who have decided to cast all rational analysis out of the window and oppose mining at all costs.

(As for community relations:

"The first environmental impact study Barrick Gold submitted to the Chilean authorities - after the bilateral treaty was adopted - neglected to mention the glaciers. It was the farmers of Huasco Valley who warned CONAMA."

See: http://www.corpwatch.org/article.php?id=13680

"Merdian has tried to soft pedal the environmental impacts of the proposal with a flawed Environmental Impact Assessment. A March 2003 independent evaluation of that assessment reveals the inadequacies of the EIA. Written by Dr. Robert Moran, the report Esquel, Argentina: Predictions and Promises of a Flawed Environmental Impact Assessment demonstrates that Meridian's proposal "[...] is the classic example, which is all too common in Latin America, where an EIA describes short-term benefits and solutions, but fails to even begin to consider long-term consequences."

See: http://www.earthworksaction.org/Esquel.cfm)

But while mining is unpopular, it is also essential. It has to happen somewhere, and behind the groups that seem to oppose any and all mining is a contingent that is happy for it to happen somewhere, as long as that somewhere isn’t anywhere near them (does the London author live downstream of acid mine drainage?).

However it is hard for the industry to defend itself against revenue grabs such as that being perpetrated in Argentina while other parties are trying so hard to paint it in a negative light and still more see it as something necessary (?) but undesirable.

(Very necessary: More than 80 percent of gold in the U.S. is used to make jewelry.)

Argentina is far from alone in seeing the mining industry as an easy target. There is a plan afoot in the U.S. to impose an 8% gross royalty on new mining projects taking place on federal land. One hopes that this act of legislative lunacy will be arrested or at least moderated before it gets onto the statute books.

(Since the law's enactment in 1872, the U.S. government has given away more than $245 billion in mineral reserves through patenting or royalty-free mining, says Rep. Nick Rahall, the West Virginia Democrat who is behind the new bill. Compare that, he says, to the $35 billion the Treasury has reaped from coal, oil and gas produced on federal lands between 1994 and 2001 alone. "So with that scenario," says Rahall, "we are indeed Uncle Sucker."

Making Gold Miners Pay )

Here is the full article.