A drive by Peru's leftist president to raise mining royalties should not derail multibillion-dollar investments, industry executives said, but they added that the final law must reflect the spirit of negotiations with companies.
President Ollanta Humala's government presented a bill to Congress on Wednesday to reform the current tax regime as industry leaders gathered for the Perumin mining convention.
Humala, who has moderated his once-radical leftist tone, was elected in June on pledges to raise mining taxes and fight poverty, creating uncertainty in a sector that accounts for about 60 percent of Peruvian export earnings.
His decision to negotiate the royalty reform with mining companies had helped dispel most investor concerns, although some industry figures said the higher tax burden threatened smaller, less productive operations.
Others say the government must ensure the law passed by Congress sticks to the outlines already discussed.
The mining sector reiterates its promise to contribute an additional 3 billion soles ($1.1 billion) to support economic growth with social inclusion in Peru, Pedro Martinez, head of the national mining society said on Friday.
But he said lawmakers should modify the government's proposal in order to ensure investment continues to flow into the fast-growing economy.
The bills submitted to Congress by the executive this week must be refined to reflect the terms fully defined and agreed upon during talks between mining companies and the government, he added.
The government proposal envisions royalties of between 1 percent and 12 percent on the profits of those mining companies that did not sign stability agreements in the 1990s.
If Humala's bill is approved, they will also have to pay a special tax of 2 percent to 8.40 percent on their profits.
Meanwhile, companies that signed stability accords would have to pay a special contribution of between 4 percent and 13.12 percent of their profits.
The proposed system, which would be based on miner's operating profits, would replace the current royalty rate of between 1 percent and 3 percent paid on sales.
Mining firms operating in the South American country have projects with planned investments of up to $42 billion for the next 10 years, according to private estimates.
Peru's Buenaventura and U.S.-based Newmont said their $4.8 billion Conga mine, the most expensive mine in Peru's history, was on track to come on line in 2014.
Companies including Xstrata , Anglo American and Barrick Gold Corp detailed their projects at this week's convention in Peru, the world's second-biggest copper and silver producer and the No. 6 gold producer.
Barrick, the world's top producer, said it was betting on Peru with a $550 million investment program and Cerro Verde said it expected to submit an environmental impact study for its $3.5 billion expansion project by year's end.
The new formula for additional mining payments meets the objectives of President Humala's government while also preserving Peru's competitive position as an attractive country for mining investment, Bruce Clements, general manager at the Cerro Verde copper mine told Reuters.
Some miners said that while big projects in Peru will go ahead as planned, smaller companies may have to reconsider if Congress passes the new tax scheme.
There are marginal projects with very marginal ore grades that if we weren't going through a time of high metals prices would never be developed, and would clearly be affected by higher taxes, Juan Luis Kruger, Gold Fields Latin American chief, said at the convention in highland Arequipa.
Gold Fields, the world's No. 4 gold producer, does not have the tax stability accords signed by many large international firms operating in Peru including Xstrata, BHP Billiton and Barrick.
Many local miners, including the nation's top precious metals miner Buenaventura, are not covered with the stability pacts. Some agreements, such as that of Southern Copper have expired.
Jose Marun, head of Xstrata's Peru operations, said future investment was at stake: The proposal we've put forward maintains competitiveness, but Peru's competitiveness has been pushed to the limit.