Mexico owes Canada miners more than $360 million, led by Goldcorp

MEXICO CITY/TORONTO: Mexico’s tax agency is holding over $360 million in tax rebates owed to six Canadian miners, including $230 million to Goldcorp Inc, according to sources and official documents, escalating the situation into a showdown between the Mexican government and Canadian mining firms operating there.
In a string of meetings, Canadian officials have pressed Mexico to fix the problem, which hamstrings mining companies’ ability to invest in operations and is particularly difficult for smaller, cash-strapped miners and explorers, people familiar with the matter said.
Vancouver-based Goldcorp declined to comment on its outstanding refund, which represents 142 per cent of its 2016 net profit and 6 per cent of its full-year revenue.
Goldcorp, the world’s No 3 gold miner by market value, is owed the largest amount, according to documents, followed by Torex Gold Resources, a small, Toronto-based miner which began commercial production at its Mexico mine last year and is waiting on a refund of some $66.5 million.
“It’s damaging the ability to reinvest the dollars in assets that actually pay real tax,” said Torex Chief Executive Fred Stanford, who is working with Mexican authorities to resolve Torex’s 2015 submissions, but declined to comment on the refund amount.
While several companies said that refund delays began to grow longer two or three years ago, exact amounts of withheld refunds have not been previously reported.
Osvaldo Santin, head of Mexico’s Tax Administration Service, acknowledged the problem in an interview, saying the agency had seen a spike in value-added tax, or VAT, refund requests.
“Given this atypical phenomenon, we are carrying out more in-depth assessments,” he said.
Working with the miners, the agency is aiming for a quick resolution to prevent it becoming an operations problem, Santin added.
Mining companies’ appetite for investing in Mexico has soured in the face of the withheld rebates as well as ongoing security threats and high royalties, said Rob McEwen, CEO of McEwen Mining.
“You take a number of these factors and when a miner doesn’t have control over them, it increases the risk,” he said. Toronto-based McEwen, which saw its Mexican mine robbed at gunpoint of 7,000 ounces of gold in 2015, said it had a $6.2 million refund outstanding as of March 31.
Nearly 70 per cent of foreign-owned mining companies operating in Mexico are based in Canada, according to Global Affairs Canada, the country’s combined foreign and trade ministry.
The value of Canadian mining assets in Mexico totalled Cad$19.4 billion ($14.4 billion) in 2015, second only to US assets worth an estimated Cad$24.8 billion. The tax row comes as foreign direct investment (FDI) in Latin America’s second-largest economy has cooled while US President Donald Trump pressures American business to grow at home.
FDI in Mexico slumped 26 per cent in the first quarter from the same period a year ago to $7.9 billion.
Unlike sales tax, which only applies to a final purchase, Mexico’s 16 per cent VAT is levied every time value is added during the production of goods or when they are sold. Mining companies, which export much of their production and spend heavily on machinery and equipment, typically generate large VAT returns.— Reuters