OceanaGold’s Didipio mine reaches comm’l production

MANILA, Philippines - Australian miner OceanaGold Corp. announced yesterday that production in its Didipio copper-gold mine in Nueva Vizcaya has reached commercial production level as of April 1.

“The Board of Directors has reviewed the monthly operating metrics and cost profile and has determined that the effective date of commercial production is at April 1, 2013. All revenues and operating costs will be reported to the income statement from that point,” the company said in a statement.

The mine was commissioned in December, with the ore process plant throughput rate placed at 2.4 million tons per annum (mtpa). This will be ramped up to a capacity of 3.5 mtpa by the end of 2014.

The company said the mine has produced more than 22,000 tons of copper gold concentrate to date.

“This marks the official start to a very important chapter for OceanaGold as we transition into a multinational gold producer,” said Mick Wilkes, OceanaGold managing director and CEO.

“We have successfully progressed from first ore in the mills to commercial production in just over three months which is a great accomplishment and a testament to the skill of the construction and commissioning teams,” he added

The Didipio mine is expected to produce 50,000-70,000 ounces of gold and  15,000-18,000 tons of copper this year.

OceanaGold is the first company in the country to operate under a Financial or Technical Assistance Agreement (FTAA) with the government. Early this year, the company asked the Court of Tax Appeals to temporarily suspend the imposition of excise tax on the operations of the Didipio copper-gold mine in Nueva Vizcaya within the five year recovery period provided by the law.

OceanaGold country director for the Philippines Bradley Norman said earlier the company is amenable to paying all the taxes demanded by the Philippine government but wants clarification on the exemptions that are supposedly due to it under its (FTAA) with the government.

“We have filed for a suspension order but we will continue to pay it (excise tax) until the area (for taxation) is finally determined,” said Norman.

OceanaGold is the first company to operate in the country under an FTAA which stipulates that contractors are allowed to recover their pre-operating expenses for a period of five years or until the date of actual recovery.

The Mining Act of 1995 stipulates that from the approval of the Declaration of Mining Project Feasibility up to the end of the recovery period, an FTAA contractor should 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 in February a memorandum circular stating that FTAA holders must pay taxes to the government even within the recovery period.

“FTAA 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 should pay the income tax after the income tax holiday granted to them has lapsed.