Panama Approves Tax Concessions For Petaquilla Mining Plan

by Mike Godfrey, Tax-News.com, Washington

28 September 2005

The government of Panama has approved a plan by the Canadian-based mining firm Petaquilla Minerals Ltd and its partners, Teck Cominco and Inmet Mining, for a multi-phase mine development plan involving a number of tax incentives.

The acceptance of the plan by the Panamanian government means that the terms of the Ley Petaquilla, a contract law passed by the Panamanian Government in 1997 setting out the terms governing the development of Petaquilla's mining concessions, will be initiated.

The Ley Petaquilla sets out stable and guaranteed land tenure for an initial term of 20 years, with two options to renew for another 20 years each. It also incorporates a favourable tax regime for the mining partnership, which includes: an accelerated depreciation and depletion allowance; exemption from import duties all supplies and equipment; exemption from all income taxes (except the mineral production royalty) until the retirement of all construction financing; and exemption from withholding tax on interest payments to foreign lenders or dividends to foreign shareholders.

Furthermore, future changes in legislation that are inconsistent with Ley Petaquilla won't apply to the owners.

The first phase in the plan is the development of the Molejon Gold Deposit commencing in 2006. The development of the Petaquilla copper deposit is included in subsequent phases of the plan, and will be the responsibility of Minera Petaquilla S.A., the joint venture company owned by PTQ, Teck and Inmet.

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