UPDATE 1-Guatemala to present mining law changes despite objections

* Government to present proposed mining changes to Congress
* Mining industry says investment will be stifled
* New projects, not existing mines, would be affected

By Mike McDonald
GUATEMALA CITY, July 5 (Reuters) - Guatemala's government
said it will move forward with a proposal to acquire as much as
a 40 percent stake in new mining projects despite a push back
from mining industry representatives who say the plan could
stifle future investment.
President Otto Perez will propose changes to the country's
mining laws as part of a package of constitutional reforms to be
presented to Congress for debate on July 16.
The proposed mining law change says "the state reserves the
right to acquire up to 40 percent of all extraction businesses.
The state will be able to become a shareholder in all companies
that extract natural resources."
Guatemala's mining chamber is pushing for the government to
scrap the plan, claiming it will hurt mining development in the
Central American country.
"The Guatemala government should immediately withdraw the
article on mining from the constitutional reform package," Mario
Marroquin, the head of the mining chamber said on Tuesday.
But Fernando Carrera, a top presidential adviser who helped
draft the reform, said the government was moving forward with
the plan, which had so far received more support than criticism.
Initial reports of the proposal last week hit shares of
Canadian miners like Tahoe Resources Inc ,
which is developing the Escobal project near Guatemala's
capital.
The company has been reassured by mining officials and the
president that the proposed changes will not affect the silver
mine, which is expected to start production next year, chief
executive Kevin McArthur said.
"There is no intent whatsoever for the government to be
taking over companies or anything," he said. "The intent was to
provide the government with the ability to invest in the sector
to promote mining and the resources industry in Guatemala."
Tahoe, which also owns exploration projects in the Central
American country, said it is opposed to language that would
allow the government to force its way into projects that
companies are able to fund themselves.
Perez, a conservative retired general who took office in
January promising to boost government revenue from mining
projects, said the new rules - if approved - would only apply to
future projects and the state would not seek shares in companies
already operating in Guatemala.
"The state will not administer or develop projects ... and
we are not talking about nationalization," Perez said after a
meeting with Marroquin and other industry representatives. "We
are talking about future mining and oil operations."
Guatemala is not a major oil producer, only pumping around
12,000 barrels per day from the northern jungle region of Peten.
The country has gold, silver and nickel mines but some projects
have been met with local opposition where indigenous villages
have complained of contamination and land expropriations.
The largest gold mine in the country, Marlin mine, is owned
by Canada's Goldcorp Inc and produced 382,400 ounces of
gold in 2011, generating $900 million in revenue.

PARTNER UP
Constitutional reforms require a two-thirds vote in the
158-member unicameral congress where Perez's conservative
Patriot Party holds 63 seats, short of the majority needed.
The government says it could win support from other smaller
parties in the chamber.
The mining clause is only one part of a 68-page package that
includes other judicial and legislative reforms. Officials from
the country's mining ministry said they were not consulted on
the amendment.
Guatemala's president set up a seven-member commission of
current and former government officials to draft and discuss the
entire package of constitutional reforms.
Mario Fuentes, a member of the panel, said the details of
how the government would acquire a stake in mining firms had not
yet been determined.
"The idea is that the state would have to buy shares,"
Fuentes said. "But right now we just have a preliminary draft,
nothing is finalized."
The amendment would not force the government to participate
in extraction projects, but advisers said there would be few
exceptions.
"Very rarely would we not want to become a partner," Carrera
said. "If there is a possibility for the government to be a
shareholder then we will be a shareholder. How big of a share,
whether 1 percent or 40 percent, will be part of later
discussions, but we want to partner up."
For the past three years, the Guatemalan government has
received an average of 50 requests for mineral exploration
permits per month. Of those, only around two per month come from
international companies looking to mine mostly nickel and
silver. So far this year, the mining ministry has extended 22
mineral mining operation licenses and issued 12 new ones.
Extraction companies must pay a 1 percent royalty on their
profits to the government by law, but this year mining companies
volunteered to pay a 3 percent royalty for base metals and four
percent for precious metals.
With the recent increases, the ministry says royalties could
total $25.5 million this year.