OceanaGold settles tax dispute, resumes transport of concentrates

MANILA, Philippines - Australian miner OceanaGold Corp. has resumed the transport of copper-gold concentrates from its Didipio mine in Nueva Vizcaya after settling its tax issues with the government.

OceanaGold Philippines Inc. chairman Jose Leviste said that to resume transport of  Didipio copper-gold concentrate production, the company settled the excise taxes demanded from them by the government.

 â€œWe paid the excise taxes under protest to the BIR,” he said in a text message yesterday.

Leviste declined to disclose the amount of taxes paid by the company but revealed that the company protested the imposition of the fine within the recovery period.

 â€œWe have a 2007 BIR Ruling which says we are exempted (from paying taxes) during the recovery period,” said Leviste.

In a statement released yesterday, OceanaGold said that “Transportation of copper-gold concentrate from the Didipio mine site to port has resumed. Approximately 9,000 tons of copper-gold concentrate has been produced to date with one-third of this delivered to the port thus far.”

OceanaGold added that “The trucking capacity is being increased to reduce the site stockpiles of concentrate in advance of the first shipment from the port in April.”

OceanaGold suspended last month the transport of concentrate from the mine as it sought clarification of the  tax exemption rules based on its Financial Technical Assistance Agreement (FTAA) with the government.

The Didipio mine is the first mine in the Philippines to operate under an FTAA, a mining agreement that allows 100 percent foreign ownership and entails a 50-50 percent revenue sharing with the government. 

Under the FTAA, contractors are allowed to recover their pre-operating expenses for a period of five years or until the date of actual recovery.

From the approval of the Declaration of Mining Project Feasibility up to the end of the recovery period, an FTAA contractor is suppose to be exempt from corporate income tax, customs duties and fees on imported capital equipment, value-added tax on imported goods and services, withholding tax on interest payments on foreign loans and on dividends to foreign stockholders, and other national taxes, except excise tax on minerals.

After the recovery period, the contractor is required to pay all applicable taxes, fees, royalties and other related payments to the national and local governments.

The Bureau of Internal Revenue (BIR), however, issued last month a memorandum circular stating that FTAA holders must pay taxes to the government even within the recovery period.

 â€œFTAA contractors are liable to pay the taxes due under the NIRC (National Internal Revenue Code) and existing rules and regulations during and after their “recovery period,” said BIR commissioner Kim Henares in memorandum circular No. 17-2013 issued on Feb. 15.

The circular states that FTAA holders must pay the income tax after the income tax holiday granted to them has lapsed.

OceanaGold is an Asia Pacific gold producer with projects located on the South Island of New Zealand and in the Philippines.

Its assets comprise New Zealand’s largest gold mining operation at the Macraes goldfield in Otago, which is made up of the Macraes Open Pit and the Frasers Underground mines.  On the west coast of the South Island, the company operates the Reefton Open Pit mine.

The company’s Didipio Project I is expected to produce an average of 100,000 ounces of gold and 14,000 tons of copper per year on average over an estimated 16 year mine life.

OceanaGold expects to produce 285,000 to 325,000 ounces of gold and 15,000 to 18,000 tons of copper in fiscal year 2013 from the New Zealand and Philippine operations combined.

Mines and Geosciences Bureau (MGB) director Leo Jasareno said the bureau has formed a team to communicate with OceanaGold on the matter.

He said the bureau is yet to discuss the memorandun circular with the BIR.