Denver — A series of revisions to the mining law offers to make exploration in El Salvador cheaper and easier.
The principal change is that the net smelter royalty is cut in half, to 2%, bringing the country in line with many of its Central and South American neighbours. All levels of government, down to the municipalities, share in proceeds from the royalty. The top corporate income tax rate is 25%.
The length of exploration licences has been increased to eight years, replacing the old, 3-year licences and 2-year extensions. The new law adds rental fees for exploration concessions, amounting to US$25 per sq. km in the first year. It increases to US$50 in the second, US$75 in the third, grows to US$100 in the years four through six, and reaches US$300 per sq. km in the last two years.
The escalating rental fees, while lower than those levied by many of its Latin American neighbors, encourage companies to make production decisions sooner or face the higher costs.
While instituting rental fees, El Salvador also removed arbitrary size constraints on concessions, allowing them to fit the size of the resource. Formerly, the mining concessions were limited to 10 sq. km.
Applications for mining concessions, however, have not changed under the new law. Mineral rights are the property of the state, and surface access has to be negotiated with landowners. Also, environmental assessments are required before the mining license is granted, and construction must begin within a year of licensing or else cancellation proceedings will be launched. The licence itself comes with a term of 30 years, with the possibility of extension. At this point, no metal mines are operating under existing laws.
El Salvador had made great strides in changing its image as an unstable republic, throwing off the shadow cast by a disastrous civil war that ended in 1992 and transforming itself into a democracy eager for foreign investment. The conservative Heritage Foundation and the Wall Street Journal ranked El Salvador eleventh, tied with Chile and Canada, in its 2000 Index of Economic Freedom. The 2001 rankings are just out, with El Salvador dropping to twelfth, but ahead of Chile and Canada.
The changes had long been on the government’s drawing board, but dealing with the effects of two strong earthquakes earlier in the year occupied most of the government’s attention, delaying adoption of the revisions. In January, a 7.6-magnitude quake, centred off the Pacific Coast, rocked the region, killing more than 600 people and causing widespread landslides across the country. As a result, transportation was blocked for weeks. A month later, the country was shaken by a second, smaller shock, centred near San Salvador. The country spent the next few months digging out from the devastation, only to be hit with one of the worst droughts in Central America in years.
Currently, the number of Canadian juniors active in El Salvador is small, though the country’s geology is as prospective as several of its larger neighbours.
Vancouver’s
Now Dayton has three more years to work on the property before it needs to make a production decision. So far, the company has outlined a resource of 4 million tonnes grading 6.7 grams gold and 49 grams silver per tonne, from just five of the 35 known bonanza veins on the 75-sq.-km property.
Toronto-based
Intrepid President Laurence Curtis believes the changes will have two significant effects. “The changes will encourage other companies to come to El Salvador,” he says, “and it will be easier to attract joint-venture partners.”
The company also expects to release new drilling data from its Aldea Zapote silver-zinc project.
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