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Survey: Tax proposal caused mining execs to lose confidence

Rob Sabo

Mining executives are concerned about the potential for new taxation in Nevada concerns that could affect their plans for future development in Nevada, says an executive of the Canadian nonprofit that conducted a recent survey.

Nevada slipped to 10th place among jurisdictions worldwide that industry executives consider to be mining-friendly in a survey conducted in June by Fraser Institute of Vancouver. A survey by the market-oriented institute earlier this year placed the state third among 51 jurisdictions.

The survey, which polled mining executives from 429 exploration and development companies, measures their assessment of mineral potential as well as companies’ confidence about conducting business in mining-friendly areas.

“Nevada suffered a bit of a setback,” says Fred McMahon, vice president of International policy research for the Fraser Institute. “Miners are concerned about taxation, and they are concerned that the attitude may be turning against mining in Nevada.”

The results of the survey probably won’t have any immediate impact on mining operations in Nevada, McMahon says, and the state’s mineral production totals remain high as gold prices hit record levels. But declining confidence in miners’ ability to conduct profitable business in the state, and an uncertainty regarding new taxes proposed for the industry could curtail future development, McMahon cautions.

“It will put mining investment and exploration below what it otherwise would have been,” he says. “It is not a disaster for Nevada. It’s still a good place to invest, but you can undermine confidence, and that lack of confidence can last for years. That sort of thing can affect Nevada over the long term.”

Tim Crowley, president of the Nevada Mining Association, says Nevada’s declining ranking comes as no surprise based on the failed tax proposal.

“Mining companies have to manage volatile swings in the value of their commodities, and also manage sometimes very tight margins, and to do that with threat of a tax that is crippling placed on top is going to have very negative ramifications on invest potential,” Crowley says. “If we can give them some predictability and assurance that unreasonable policies won’t be thrust upon the industry, our ranking as a healthy place to do business will recover.”

Adds McMahon: “Miners expect to pay tax and abide by regulations, but the whole situation has to be stable. Miners spend years and years throwing money into the ground before they start taking money out of it. Miners have to be confident that the place is not going to suddenly change the rules when they get to the making-money phase. The (Nevada) referendum, had it succeeded, would have done that.”

McMahon says that undermining confidence about mining activity in the state could affect future jobs and investment, which could lead to declining tax revenues from the mining industry. Crowley says 60 percent of the taxes paid by mining companies goes to the state’s general fund.

Exploration and investment is the mining industry’s research and development, and declines in either eventually would negatively impact production levels, Crowley says.

Another jurisdiction that’s looking to raise mining taxes the Canadian province of Quebec dropped from first to third in the survey. The province of Alberta replaced it in the top spot.