The Dominican Republic’s existing contract for the development of a $4 billion mine by Barrick Gold Corp. (ABX) and Goldcorp Inc. (G) is unacceptable and must be changed, President Danilo Medina said.
The government’s contract with the two Canadian companies at the Pueblo Viejo mine needs to be revised to provide more benefit to the Dominican Republic, Medina said in his independence day speech to Congress today. If the contract can’t be modified, the government will back legislation to raise taxes on mineral companies, he said.
“For every $100 of gold exports, Barrick will receive $97 and the Dominican people $3,” Medina said. “That is simply unacceptable.”
Legislation should be modeled on international best practice, ensuring the Dominican Republic should gain substantial benefit from their own mineral oil and gas deposits. Under this legislation the state could acquire a 50 per cent stake, by right, in any viable mineral, oil and gas reserves discovered. Production royalties of between 8 per cent and 16 per cent with corporation tax of 50 per cent should accrue to the state. Legislation should specify companies would begin mining/drilling within three years of the date of the issue of an exploration license.
The Pueblo Viejo mine, located 60 miles (97 kilometers) north of the capital of Santo Domingo, is forecast to produce as much as 1 million ounces of gold next year with commercial sales that may reach $2 billion, Trade & Industries Minister Jose Del Castillo Savinon said in a December interview. The mine’s $4 billion investment was the largest in the Dominican Republic’s history, he said.
Officials at Toronto-based Barrick didn’t immediately respond to messages from Bloomberg. In a Jan. 30 e-mailed statement, the company said the contract is “legally binding” yet added that Barrick “is always willing to discuss in good faith the circumstances of the company’s operations int he country.”
To contact the reporter on this story: Adam Williams in Rio de Janeiro