By David Alire Garcia
MEXICO CITY, April 15 (Reuters) - Mexico's top mining
official says he backs the industry's push for tax legislation
that would save hundreds of millions of dollars a year in
exploration costs, though they have yet to win over the
country's powerful finance ministry.
Mario Cantu, the economy ministry's mining chief, said in an
interview on Thursday that Mexico's mining lobby is seeking a
series of meetings with members of Congress to also press its
case for tax help for the ailing sector.
"The mining chamber ... is making its argument and asking
for support," he said, adding he is also lobbying for the tax
change to help miners as they grapple with multiyear lows in
metals prices.
Mexico is the world's biggest silver producer, as well as a
Top 10 gold and copper producer.
It may be an uphill slog for companies to again be able to
deduct exploration costs in the same year they are incurred. The
deduction was eliminated in 2013 just as new mining taxes were
enacted.
The change is opposed by Mexico's powerful finance ministry,
which said in a statement to Reuters it has "no plans" to
formally propose it.
"It isn't appropriate because it would only allow immediate
investment deductions for the mining sector," the ministry said
in a statement.
The value of total mining production in Mexico last year
stood at $13.5 billion, down about one-quarter since 2012.
If the deductions are adopted by Congress, it would mark a
victory for the cash-strapped sector, struggling through the
worst market downturn in a generation.
Base metal prices for copper and lead have slid by about 50
and 30 percent, respectively, since early 2011.
Meanwhile, silver has tumbled more than 70 percent over the
same period.
Cantu said he thinks Congress will likely approve the
deduction during the session that begins in September.
"We think this can provide more benefit by creating and
identifying the best future mines," he said.
The deduction for exploration costs would involve a
significant hit to the country's tax take. Total private-sector
mining investments for exploration in Mexico stood at $1.17
billion in 2012, though it is expected to be just above $600
million this year.
Like many of the country's biggest miners, Grupo Mexico
GMEXICOB.MX , a top copper producer, has cut exploration
spending by more than one-fifth since 2012 to about $49 million
last year.
While President Enrique Pena Nieto's Institutional
Revolutionary Party has consistently been able to pass its
legislative priorities without having an outright majority in
Congress, internal divisions within the government could doom
passage of the deduction.
Cantu, a former finance ministry and tax official, said he
also thinks Congress will permit mining companies to deduct
spending on community development.
While it is unclear how much mining firms in Mexico spend on
social projects, many have built local schools and hospitals,
and top precious metals miner Penoles PENOLES.MX even donated
a zoo in northern Zacatecas state.
Mining companies are pushing for the deductions as new taxes
have cut into their bottom lines.
Tax reform in 2013 included mining taxes that raised 2.66
billion pesos ($153 million) during the first three months this
year, according to data from Mexico's tax agency.
($1 = 17.3865 Mexican pesos)
(Editing by Jeffrey Benkoe)