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.
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