What u need 2 know re: Mining In Peruhttps://www.panoro.com/s/Elrosal.asp?ReportID=63379
Mining in Peru
Peruhas a long history of mining which predates the Spanish conquistadors.Although political unrest and instability have slowed the development ofsome of Peru's ore bodies in past years, mining continues to be animportant contributor to the national economy and exploration by foreigncompanies is accelerating due to the abundance of mineral resources.Peru is already a substantial producer of at least six metals and mayhave unexplored and unexploited reserves in these and other metals. Themining sector produces almost 50% of the country's total exports. Peruhas now become Latin America's largest gold producer (taking over fromBrazil) and has consequently gained the recognition of the global miningcommunity. For several years it has been Latin America's number onecopper producer.
Concessions in Peru
Under Peruvian law, the right to explore for and exploit minerals isgranted by way of concessions. A Peruvian mining concession is aproperty-related right, distinct and independent from the ownership ofland on which it is located, even when both belong to the same person.The rights granted by a mining concession are defensible against thirdparties, transferable, chargeable and, in general, may be the subject ofany transaction or contract. Participating interests in miningconcessions can be optioned or transferred. Buildings and otherpermanent structures used in a mining operation are considered realproperty accessory to the concession on which they are situated. Theterm of a mining concession is indefinite if it is properly maintainedby payment of annual rental duties.
Miningconcessions applied for, and awarded title according to the Grid BasedSystem ("Sistema de Cuadrículas"), are single concessions forexploration and exploitation.
1 They can be granted formetallic or non-metallic minerals, and no overlap between them isallowed. Exploration and exploitation works may be initiated once titleto concession has been granted, except in those areas of overlap withpre-existing claims or concessions applied for before December 15, 1991.
2Mineral rights are granted in units of 100 hectares with a maximum of10 units (1000 hectares) or 100 units (10,000) in territorial waters, ina rectangular shape north-south east-west orientated UTM coordinates.However, in areas defined urban or urban expansion, mineral rights aregranted in units of 10 hectares with a maximum of 100 hectares.
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As of 19924 concession holders must pay an annual rental ("derecho devigencia") by June 30th of each year. The following table shows theevolution of the annual rental since 1992:
| Rate of the Annual Rental(Year) |
US$(per hectare and per year) |
| 1992(From Jan. 1 1992 through to August 18, 2000) |
2 |
| 2000(From Aug. 19, 2000 through to April 9, 2001) |
5 |
| 2001(From April 10 until December 31, 2001) |
4 |
| 2002 |
3 |
The concession holder must reach a minimum level of annual production ofat least US$100 per hectare in gross sales within six years from thetime the title to concession is granted ("Minimum Required Production").Mineral rights held by State-owned companies under the privatizationprocess, are exempted from the Minimum Required Production until January1 of year following their transfer to the private sector.
5If the concession has not been put into production within that period,then the concession holder must make an additional payment calledPenalty ("Penalidad") of US$6.00 per hectare for the 7th through 11thyear following the granting of the concession, and of US$20.00 perhectare thereafter.
6 The concession holder shall be exemptedfrom the Penalty if the investment made during the previous year was 10times the Penalty (i.e. US$60 per hectare per year 7th through to 11th).
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Prior to November 2, 1996, failure to pay the annual rental or thePenalties for two consecutive years or three alternate years resulted inthe termination of the mineral right ("caducidad"). To date, failure topay the annual rental for two consecutive years or the Penalty, willresult in the termination of the mineral right.
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Ownership, Income Tax and Repatriation of Profits
In 1992 Peru enacted a new mining law which:
- guarantees land tenure for mining rights distinct from surface rights where a minimum rental is made to hold title on mining rights;
- enumerates only specific and limited circumstances (arising mostly due to negligence of the title holder) under which mining rights may be lost with no discretionary power by the mining authority;
- grants equal rights to explore for and exploit minerals by way of concession to both Peruvian nationals and foreigners;
- establishes tax, administrative and exchange stability for mining investors; and
- establishes the right to sell mining production freely on world markets.
The Peruvian government has in place measures to attractforeign investment including measures which grant new property rightsand guarantees to foreign investors and financial incentives forinvestment in the mining sector. Definitive recovery of the Value AddedTax (18%) for exploration projects is in place since 2002.
Under the Peruvian income tax law, the corporate tax payable is:
- 27% over the annual net income. Advance monthly payments are required on a percentage of gross income, subject to a final settlement in March of the following business year (January 1st through December 31st); and
- 4.1% dividend tax is payable by shareholders when profits are distributed. This does not apply to amounts distributed to domiciled legal entities.
Peruvian law grants tax free use of foreign exchange. Thereare currently no restrictions on the ability of a company operating inPeru to transfer foreign currency from Peru to other countries or toconvert Peruvian currency into foreign currency.
Government Protection
Agreements have been signed by the government of Peru with affiliates ofthe World Bank and with the Overseas Private Investment Corporation toinsure foreign investors against such non-commercial risks asexpropriation and abrogation of contracts. Peru has signed the Agreementfor the Constitution of the Multinational Investment Guarantee Agency, aWorld Bank agency, and The Agreement for Investment Insurance with theUnited States Overseas Private Investment Corporation ("OPIC") and theWorld Bank Convention on the Settlement of Investment Disputes. Althoughthese agreements, as ratified by the Peruvian Congress, allow investorsto insure against non-commercial risks such as expropriation andabrogation of contracts, subsequently elected governments could revokethese agreements. These multinational agencies provided their backing,and the backing of their governments, in petitioning governmentalcompensation in the event of expropriation. As a result of theseagreements, agencies such as OPIC are able to provide specific projectrisk insurance and project financing at the time of development.
Environmental Laws
The Environmental Code, the Law for the Sustainable Use of NaturalResources, and the General Mining Law of Peru are the primary body oflaws with regard to mining environmental issues. The Ministry of Energyand Mines (the "MEM") designs and implements the environmental policy,and enforces the environmental regulations applicable to the miningindustry. There are Maximum Permissible Limits ("LMP") for air andliquid emissions applicable to the mining industry. EnvironmentalAdjustment and Management Programmes ("Programas de Adecuacion y ManejoAmbiental" or "PAMA") have been set up for ongoing mines as themechanism for them to comply with the environmental laws and regulationsand meet the LMP. PAMAs must include expenditures of at least onepercent of annual sales on the environmental program. New developmentsor the increase of more than 50% of the installed capacity in ongoingprojects require an Environmental Impact Study ("EIS"). EIS comprisemonitoring, remediation, closing and post-closing programmes. Miningcompanies are also subject to periodic environmental audits.
Pursuant to the Environmental Regulations for Mineral Exploration(Supreme Decree 38-98-EM approved on November 30, 1998), in order tocarry out exploration activities, titleholders must request anenvironmental permit before the MEM. For purposes of qualification andapproval of environmental permits, exploration projects have beenclassified into three categories, namely "A", "B" and "C", according tothe size and extent of activities, and to the area directly disturbed asa result of the exploration works. In the case of on-going explorationactivities by November 30 1998, their title holders were required toreport the activities carried out and apply for an environmental permitnot later than May 30, 1999.
Public participation by means of workshops and public audiences arerequired during the preparation of EIS and Exploration Permits category"C".
The above information was prepared using a variety of sources including"The Statesman's Yearbook (2003)" and "Analysts' View of the PeruvianEconomy (Commission for the Promotion of Peru - December, 1999)".
Footnotes