MANILA, Philippines - Australia's OceanaGold Corp has temporarily stopped the first shipment of copper-gold concentrate from its Didipio mine in the northern Philippines following confusion over its tax treatment, the firm said on Monday.
The Didipio mine in Nueva Vizcaya province, now in the commissioning stage, is the first project to operate in the Philippines under the Financial and Technical Assistance Agreement, or FTAA, structure.
Under an FTAA, a permit issued by the state agency Mines and Geosciences Bureau to foreign investors owning 100 percent of a local venture, the project with a 25-year term is allowed a five-year tax holiday.
The Bureau of Internal Revenue (BIR) last week said miners with FTAAs were not exempt from paying the 2 percent excise tax even if their permits gave them a five-year period from the start of commercial operations within which to recover pre-operating expenses.
"Miners must pay the excise tax the moment they start producing ores," BIR Commissioner Kim Henares told Reuters.
OceanaGold said it was in talks with Philippine authorities on the interpretation of the tax exemptions linked to its FTAA.
"Due to these clarifications, some of the trucks used for transporting concentrate are being held by local government agencies and thus transport of copper-gold concentrate has been temporarily suspended," the miner said in a statement.
The issue is about when OceanaGold should start paying the excise tax, Nova Young, its investor relations officer, clarified.
"It's just the timing of when we have to pay it," she said by telephone from Melbourne. "We don't think it's a serious problem in terms of our operations. Our plant is still up and running."
Flip-flopping policies, particularly on mining tax issues, are among the concerns of foreign investors in the country. The development of an estimated $850 billion in Philippine mining reserves has been held up by reviews of policy, including the lack of consistency in national and local government rules.
OceanaGold has an offtake agreement with Geneva-based commodity trader Trafigura for all the copper and gold concentrate output of Didipio mine.
The offtake is for a minimum of five years. Didipio, with an expected 16-year mine life and a large open-pit operation, is estimated to produce an average 100,000 ounces of gold and 14,000 tonnes of copper each year.
OceanaGold has the right to seek a renewal for another term not exceeding 25 years for the project.