Pan American calls for repeal of net smelter tax

Vancouver-based miner Pan American Silver's (TSX: PAA) chairman Ross Beaty has called on the Peruvian government to repeal its new net smelter royalty. Pan American had paid US$500,000 due to the 1% net smelter royalty on all production, said Beaty, who was speaking during a conference call to announce the company's first quarter results. The chairman described the royalty as a "very regressive" tax that will affect the investment climate in the country. Beaty said he does not object to paying income tax on Pan American's Peruvian operations as this means the company's mines are profitable. However, the new smelter royalty is imposed even if a mine is losing money. "We hope the Peruvian government will reverse this in due course once it appreciates the negative impact of such a royalty on the investment climate in Peru." FIRST QUARTER LOSS Pan American recorded a US$2.9mn loss in the first quarter of 2005 and Beaty said the topic of the company's AGM was to discover where the earnings had gone. "Our financial results were disappointing in view of the 4% stronger silver and 20% stronger base metal prices we are now seeing relative to a year ago," he said. Although the company's revenue increased 79% during the quarter on the back of increased silver production and concentrate shipments, this increase was eroded by costs, which rose at an even higher rate, Pan American has stakes in Peru's Quiruvilca silver-zinc mine, the Morococha silver mine and the Huaron mine, among other properties.