Pan American Silver Corp. (TSX:T.PAA, Stock Forum) said Monday that the company will suspend further investment in the Navidad Project, in the event that a new law in Argentina is approved.
The new law, if passed, would regulate all future oil and gas and mining projects in the province of Chubut, Argentina. According to Pan American, the results would render the Navidad project uneconomic, based on any reasonable estimate of long-term silver prices.
As stated in the press release, Pan American's Navidad Project is located in Chubut, Argentina. The company has been working to advance the silver endeavor into the development stage over the past two and a half years and in the future they had hoped to turn the project into an open-pit mine.
This draft legislation introduces a series of new regulations that will greatly increase royalties on, and impose economic participation by the province in all mining projects, including Navidad.
The proposed regulations include a new 5% Net Smelter Return Royalty in favor of the province, a new requirement for a resource company owned by Chubut province to receive no less than 4% of total sales and to receive a 7% direct carried net pre-tax profit interest.
These increased royalties and the net carried interest are in addition to the 10% export duty payable on the sale of concentrates and the 35% income tax rate, which are payable to the federal government.
This level of government participation and tax burden is unprecedented relative to any of the other jurisdictions where Pan American operates.
Pan American Silver's mission is to be the world's largest and lowest cost primary silver mining company by increasing its low cost silver production and silver mineral reserves.
On Monday, Pan American was trading for $17.23 a share. The company has a market cap of $2.7 billion, based on $153.8 million shares outstanding. The 52-week high and low was $34.26 and $14.97 respectively.