The mining export tax that Argentina's government announced in late 2007 will affect tax revenues in Catamarca province, local mining minister Jose Sinner said.

"This tax issue impacts us heavily because our calculations indicate that yearly revenues in the province will be reduced by a total of around 67mn pesos [US$21mn], which is quite significant for us," he said.

The largest impact will be seen in revenues that the province receives from a contract between the company YMAD and gold-copper producer Minera Alumbrera, as the miner's profits will fall as a result of the tax, the official said.

"YMAD is entitled to 20% of Alumbrera's earnings and the province earns 60% of that 20%," he added.

In February, Alumbrera – where Swiss resources group Xstrata (LSE: XTA) holds a 50% stake – paid US$61mn of its fourth quarter profits to YMAD.

MORE CONSEQUENCES

The official also said that although export taxes improve the state's revenues, they do not benefit the provinces. "That means those taxes are not going to trickle down."

Sinner said there is a chance the mining tax could also affect revenues the province receives from royalties. "It will force down the value of sales and therefore reduce the amount of royalties paid to the province," he said.

He also pointed out the need to calculate how the tax will affect cutoff grades at local mines to determine whether it will shorten mine lives and in turn affect employment, the sale of supplies and services from local providers and royalty payments.

Catamarca is the only Argentine province that produces copper and lithium, and is the country's largest gold and silver producer.

The value of mining exports from Catamarca grew some 35.2% last year to US$96mn from US$71mn in 2006. The province also exports lithium chloride, lithium carbonate, boric acid, hydroboracite, sodium octaborate, borax, perlite and uxelite.

In addition to Alumbrera, Catamarca is also home to the Agua Rica copper-gold-molybdenum project operated by Canada's Yamana Gold and the Ri­o Colorado uranium-copper-silver project held by Australian company Jackson Gold. – BNamericas