PMI GOLD CORPORATION PMVGF

RE: Ghana : To Hike Taxes on Mining Companies

[Boolish]

This has been in the works for quite some time. Originally tabled over 8 months ago...and recommended by the IMF. Of course the mining companies will grumble and politicize but at the end of the day Ghana is still a country conducive to mining.

I think you will see this trend continue more and more out of countries...and now that Ghana has acted other African nations will follow suit....if their corporate tax is not already 35%. It is my belief the Ghanese plays have priced this in...and in fact overshot on the downside. The weakness is more likely related to the POG and the general markets than the much anticipated tax news.

A few comments below...there was also one from a Dundee analyst yesterday saying even 100% exposed Ghanese plays should not see more than a 3% decline in NAV. This will be long forgotten in a few weeks and back to business as usual.

 Ghana looks to boost mining taxes

Yesterday, the Government of Ghana outlined plans to increase mining taxes as part

of its 2012 budget speech. Specifically, the 2012 budget speech calls for the

following changes beginning in the fiscal year 2012:

1. Raising the corporate tax rate for mining companies to 35% from the

current 25%.

2. Implementing a windfall profit tax of 10%. We note that no details have

been released regarding the thresholds at which the windfall tax would

apply.

Impact: SLIGHTLY NEGATIVE.

Newmont and Kinross are the only gold companies in our coverage universe with

exposure to Ghana. We have adjusted our models to incorporate the higher income tax

rate, but we have not included the windfall tax at this point due to 1) the lack of clarity

as to the thresholds at which it would apply and 2) whether the government expects to

override existing investment agreements or to whether it plans to apply the windfall

tax only to new projects or projects without existing investment agreements.

The net result of the higher corporate tax rate is a 1.9% decrease to our

Newmont NAV5% and a 0.5% decrease to our Kinross NAV5%. Our 2012

CFPS estimates for Newmont and Kinross decrease by approximately 1%. Our

recommendations and target prices are unchanged (Newmont: BUY, $85 target

and Kinross: HOLD, $19 target).