Phelps Dodge: Royalty will not impact present ops

Phoenix-based miner Phelps Dodge's (NYSE: PD) president Timothy Snider believes application of the "Royalty II" mining tax will not affect current company investments in Chile. But the royalty could impact future projects, which would result in lower profit. Chile has political, economic and social stability plus regulations in place which since 1990 have encouraged foreign investors to live and invest in the country, newspaper El Mercurio quoted Snider as saying. "The mining industry has a long investment history that makes it competitive. With this tax [the sector] could lose part of this competitiveness that makes it different," the executive said. "This is a discriminatory tax that generates uncertainty." In March, Chile's lower house approved a royalty bill to introduce a 5% tax on operating profits and create a levy on all miners whose annual sales exceed US$5mn unless operating margins are less than 8%. The measure also would establish the option of a 15-year tax stability regime for mining operations bringing in foreign investment of US$50mn or more. The senate has already started to discuss the bill and will vote on it this week. In Chile, Phelps Dodge controls 80% of the Candelaria copper mine, 51% of El Abra and property at the recently opened Ojos del Salado. Regarding its operations in Latin America, Snider said efforts are focused on the Candelaria project in the north of Chile and the Cerro Verde sulfides project in Peru.