(all amounts in US$, unless otherwise indicated)
VANCOUVER, July 2, 2012 /PRNewswire/ - Pan American Silver Corp. (PAAS: NASDAQ; PAA: TSX) (the "Company", or "Pan American"), today reported that, as expected, the governor of the province of Chubut, Argentina, Martin Buzzi, has submitted to the provincial legislature a draft law which, if passed, will regulate all future oil & gas and mining activities in the province. The draft legislation will be subject to review and possible modification by a parliamentary sub-committee, after which it will be submitted to the full legislature for debate and vote. Pan American's Navidad project is located in Chubut.
After two and a half years of patient and diligent work to advance the Navidad project into the development phase, Pan American was initially pleased to find that the draft legislation incorporated the expected zoning of the province, allowing for the development of Navidad as an open pit mine. However, this same draft legislation also introduces a series of new regulations that will greatly increase royalties on, and impose economic participation by the province in all mining projects, including Navidad. The proposed regulations include:
- A new 5% Net Smelter Return Royalty ("NSR") in favor of the province, which is in addition to the 3% NSR in favor of the province that already existed;
- A new requirement for Petrominera, a resource company owned by Chubut province, to receive no less than 4% of total sales; and
- A new requirement for Petrominera to receive a 7.0% direct carried net pre-tax profit interest. (In the event that a company can demonstrate that Petrominera's right to 4% of total sales would render a project uneconomic, then Petrominera's participation on the project's total sales would be reduced by up to 75%. However, in such case, the net pre-tax profit interest would be increased to a minimum of 12%.)
These increased royalties and the net carried interest are in addition to the 10% export duty payable on the sale of concentrates and the 35% income tax rate, which are payable to the federal government.