Posted on 02/13/2012 7:49:17 PM PST by Razzz42
Most of you who read this site are well aware of my political leanings - I happen to believe that the current administration is perhaps the most inept, reckless and endangering to liberty in the history of this nation and needs to be replaced at the ballot box this coming November.
Those of you who own mining company stocks should take note that as part of the budget submitted by the Obama administration, all hard-rock mining companies would be required to pay annual rents and royalty fees of no less than 5% of gross proceeds.
Currently a law that is 140 years old, exempts them from paying royalties to the US government.
Environmentalists have been after this law for years and have found their champion in the current occupant of the White House.
The rental portion of this budget would impose a fee on for both public and private lands with the funds supposedly being used to clean up abandoned mines. Coal companies are currently under a similar plan.
Don't worry however - I am completely assured that every bit of the monies raised from this targeted plundering will be put to good use for the American citizenry with absolutely none of it going to cronies of Obama such as Solyndra.
Were it not for the fact that most political analysts expect the Obama budget to be DOA in the Congress, the mining shares would have been sharply lower today. Those of you who own these things are well advised to pay close attention to this. Senator Harry Reid, who has long ago sold his soul to the left's agenda and who hails from a swing state, will probably be getting an earful from mining company executives with any connection to the state of Nevada. I will be surprised to see him actually coming out in support of this proposal if he wishes to run for re-election next time around. Then again, he might be ready to retire by 2016.
SHEESH.....we are being eaten alive...
I wonder if there will be a nation to hold together after four more years of this guy.
This is something the environmentalists put up every single year.
The gross tax is fundamentally unfair and will directly lead to a decrease in production. The gross tax makes blocks of ore unprofitable to mine leading to a decrease in our overall resource production. Once a mine plan is made it can be very difficult to incorporate low grade blocks at some date in the future. Of course, there already is a net tax in the form of corporate income tax on mining companies.
The tax is pursued by environmentalists and there is a Pew foundation dedicated to raising taxes on hard rock miners. Mining companies already pay tax to the federal government. They have to buy reclamation bonds, endure endless permitting issues and challenges which decrease the NPV of any project, jump through hoops to satisfy regulators once mining has begun (particularly of the federal variety), and then remediate the mine site to a standard that leaves it better than when they started mining. All of these are costs that the federal and state governments impose on mining companies before talking about any kind of profit.
The sad part is that something like this will probably pass if the gold price remains high for the next few years. The Nevada gold miners already agreed to extra taxes and are under pressure for more.
Also, besides decreasing production, this will lead to a decrease in very well paying jobs. Professionals in the mining sector do very well and hard rock mining employees a large number of Americans, directly and indirectly.
This tax could also make a project uneconomic from the start which is what the environmentalists are really after. Mining profits are generally relatively low and are based on high volume, low margins. The introduction of this tax after a mine has begun operation will lead to sub optimal production rates. Due to the huge regulatory issues and the ease with which environmentalist lawsuit factories, some of which receive grants from the government, many mining projects are never permitted. If they are, millions have been spent in the permitting stage and possibly billions more over several years for development costs before any kind of return is achieved. This delay decreases the net present value of the project and can make certain mines, particularly low volume, low margin mines, artificially economically unattractive.
This is why the US mining giants have expanded overseas to Africa, PNG, Indonesia, etc.
Time to take out the trash in November.
employees=employs. It’s late.
Jim Sinclair, who I occasionally post a link to, is trying his hand at running a mining company (Symbol TRX) in the country of Tanzania. The land parcels he bought to explore for precious metals came up pretty much dry for commercial production. He had to give the country a 45% stake in one area of land that might be promising in exchange for rights to mine and more adjacent land to explore. Has to come to production in less than two years or the deal changes somehow.
The only thing that will save the company is a rich strike and volume production. Those probabilities are low when it comes to mining.
And more and more countries are starting to horde their mineral rights.
Yeah, the state share and the payoffs are an unfortunate part of life when mining in the third world.
This is why the US mining giants have expanded overseas to Africa, PNG, Indonesia, etc.
Absolutely, it’s prohibitively expensive to mine in the USA now and the long term liabilities are extreme. I’m just glad I got my 27 years in before the mine I last worked at closed. Sadly, most of the places I worked before the last one still have good ore bodies in a sane environment. They are, none the less, closed with the exception of the Carlin Gold properties (Newmont). They would be hurt by any 5% gross tax.
Since when does a budget override a law?
This was a heads up. A reoccurring theme trying to extract more money from the mining industry. Actually only the House of Representatives has the authority to initiated a funding bill along with needing Senate’s approval but Congress hasn’t produced a budget for about 3 years now just stop gap funding measures and raising of the debt limit(s).
In December Congress just fought over extending a payroll tax credit...for a further two months, again fighting over extension it as it’s set to expire end of this month....Typical.
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