Corporate tax increases in Mexico will compel mining companies to take a close look at future investments there, says Terry Coughlin, president of Halifax-based GoGold Resources Inc.
Obviously, looking at projects in Mexico, its something to consider, he said Wednesday.
The Mexican government is implementing tax reforms that could increase the countrys corporate income tax rate to 30 per cent and impose a 7.5 per cent royalty on mining earnings.
Coughlin said the proposed measures havent received presidential approval and he wasnt sure what their final impact will be.
Were still trying to figure out how the taxes will be implemented, he said. We have people looking at it.
GoGold was recently given approval by the Mexican Environment Department to proceed with its $35-million Parral tailings project in Chihuahua State.
Construction is underway and Coughlin expects production to begin in May.
GoGold projects an average annual production of 1.8 million silver equivalent ounces (1.2 million ounces of silver and 11,000 ounces of gold).
The project has a pre-tax internal rate of return of 80 per cent with a pre-tax net cash flow of $230 million and a pre-tax net present value of $159 million.
Coughlin said the proposed tax hikes have upset a number of large Mexican mining companies.
But he said they wont have a significant impact on the Parral project, given its positive eco-nomics and GoGolds land-holding position.
Glenn Holmes, chief financial officer with Bedford-based NSX Silver Inc., said the proposed increases wont have an immediate impact on his firms Mexican projects, which are still in early-stage development.
It wont affect us, he said in an interview.
He said the increases might have an impact on project valuation and company share prices.
But he called the changes a cost of doing business that is offset by Mexicos prolific gold and silver resources, its co-operative bureaucracy and its proactive attitude toward mining.
Holmes said the mining sector has lobbied the Mexican government to look closely at the proposed changes, particularly the royalty rate, which is seen as high.
