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By Shane Romig
BUENOS AIRES--Pan American Silver Corp. (PAAS, PAA.T) has shelved work on its Navidad silver mine project in Argentina's Chubut province due to the local legislature's failure to pass a regulatory plan for mines and a proposed bill that could sharply raise taxes on the industry.
"We've suspended new investment in Navidad until we have legislation in Chubut that will allow us to develop the project," Pan American Silver Argentina's business director, Ricardo Zarandon, said.
Chubut provincial Gov. Martin Buzzi has sponsored legislation that would slap a new 5% net smelter-return royalty on top of the current 3% royalty. The bill would also require the provincial government-owned resource company, Petrominera, receive no less than 4% of total mineral sales.
In July, Pan American warned it would suspend further investment in Navidad if the legislation becomes law.
High inflation and "the increased provincial participation will render the Navidad project uneconomic at any reasonable estimate of long-term silver prices," Pan American said in a statement at the time.
No bill has been passed yet, but the uncertainty proved too much for Pan American to move forward with Navidad.
According to the company's website, Pan American spent $45 million in 2011 and $37.5 million in 2010 on developing Navidad.
Pan American currently operates the Manantial Espejo silver mine in Argentina's Santa Cruz province, where the governor is also seeking to tap the mining industry to plug a wide budget gap.
Earlier this year, Santa Cruz Gov. Daniel Peralta proposed legislation that would see provincial mining company Fomicruz take a 10% equity stake in current and future mines without compensation, and increase royalties to 8% of the value of mineral output.
While it isn't clear if the bill will be passed, the cash-strapped province's repeated attempts to secure more tax revenue out of the mining industry threaten a decade-long investment boom that has made Santa Cruz home to the bulk of Argentina's gold mines.
Other Companies with Santa Cruz operations include AngloGold Ashanti Ltd. (AU, ANG.JO), McEwen Mining Inc. (MUX, MUX.T), Hochschild Mining PLC (HOC.LN), Mirasol Resources Ltd. (MRZLF, MRZ.V), and Minera IRL Ltd. (MIRL.LN, IRL.T).
Write to Shane Romig at email@example.com
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