Royalties Loom for Mexico's Mining Industry

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The mining industry in Mexico has been anticipating the imposition of mining royalties by the government for some years. Now that anticipation has turned to near certainty that the move could be made in 2014.

The mining sector in many regions of the world is under pressure to provide for windfall taxes and handle the implications of resource nationalism, whereby governments seek to retain a greater slice of mining profits. Mexico is unusual in that it does not impose any royalties on the sector.

Under the current system, there are no taxes or levies imposed specifically on the mining industry. Companies are subject to standard corporate income tax rates, which are determined by the federal government, reports Business News Americas.

Fresnillo's (LSE:FRES) (Mexico City) head of investor relations, Gabriela Mayor, said that the royalty proposals were already on the agenda and will be discussed when the senate and chamber of deputies meet this autumn to set the 2014 budget. She added that no indication had been given on what percentage will be levied. Mayor was on a teleconference discussing Fresnillio's 2012 production.

The company, which is 77.1% owned by Penoles (OTC:IPOAF) (Mexico City), is the world's biggest primary silver producer and produced 41 million ounces in 2012.

A new mining bill, outlined in President Enrique Pena Nieto's pact for Mexico, is likely to include reforms to concessions and mining rights payments aimed at benefitting local communities. This bill is expected to be presented in the first half of 2013, but there is doubt that royalty proposals will be included.

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