TORONTO (Reuters) - Argentina brushed off concerns on Monday that new export duties on companies will hurt investment, but mining giant Xstrata Copper said the measure hurts the country’s credibility and throws into question Xstrata’s $2-billion El Pachon project there.
Argentina’s mining secretary, Jorge Mayoral, also said that legal actions against the tax by mining majors Xstrata, Rio Tinto, and others are unlikely to proceed to international courts.
When asked by reporters about the impact of the duties, Mayoral said that only “logistics” — not regulatory issues — will limit mining and exploration growth in mineral-rich Argentina.
“We have been growing and we will grow again in 2008,” he told reporters, in Spanish, on the sidelines of an international mining conference in Toronto.
Xstrata in Argentina and at least four other companies have begun a legal challenge to fight the export duty, which affects 14 companies.
The change, made by the government in December to take advantage of high global metals prices, scraps exemptions to export taxes that had been introduced in 2002.
“The decision of the government to apply the export duty on mining companies ... sends a very negative message to international investors and affects the credibility of the country,” Claude Ferron, the chief operating officer of Xstrata Copper Canada, told Reuters in an e-mail.
“An investment in El Pachon will be harder to justify from a country-risk perspective due to the present uncertainty about the stability of Argentina’s regulatory framework,” he wrote, adding he is hopeful the country’s “counterproductive” move will be resolved through negotiations.
The $2-billion El Pachon copper project is located in the northwestern province of San Juan, and would represent one of Argentina’s biggest mining investments.
Mayoral made his comments following a presentation during the Prospectors and Developers Association of Canada convention in Toronto, where he touted mining opportunities in Argentina, which has seen exploration grow by about 200 percent in the last five years.
Participating in Mayoral’s presentation were officials from London-based Rio, and Brazil’s Vale, who gave updates to operations.
Although largely expected, the tax move will remove exemptions from export duties, of 5 to 10 percent, for miners. Argentine mining law guarantees tax stability for miners for 30 years from the time they submit feasibility studies.
Reporting by Jonathan Spicer; Editing by Peter Galloway