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Dominican Republic

Dominican Republic. Mining P roperty. All mineral substances belong to Dominican State. Exploration rights are granted through concessions or contracts by Dominican Government

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Dominican Republic

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  1. DominicanRepublic

  2. MiningProperty • All mineral substances belong to Dominican State. • Exploration rights are granted through concessions or contracts by Dominican Government • Mining concession rights is distinct from the surface land right. Mining concessions grant exclusive rights of exploration, extraction and processing over the mine area

  3. Mining Rights • Recognizes the priority for the first to request the area. • Exploration concession is for 3 years and might be extended up to 10 years. • Extractionconcessionsrights are for75 years • It’s required by the Law of Environment an environmental license to operate an exploration or extraction mining concession.

  4. Tax Regime • Mining Law • 29% net income tax (IRS). • 5% of net income,taxfor communities. • 10% importation tax. • 18% tax for local purchases. • Special Contracts • Special tax regimes apply for mine properties belonging to Dominican State: • 50% sharing on net earnings as tax. No other tax apply • Applies to contracts of Gold (Barrick Gold and Panterra Gold) and Nickel (Glencore Xstrata)

  5. TaxRegimeUnder Mining Law • All mining operation should pay 28% of their net income each year, as income tax. • Additionally should pay 5% of their net income to municipalities where the mine is located, according to Environmental Law. • In case of no earnings operation, companies should pay at least a tax rate of 5% FOB value of any exported ore or metal product.

  6. Ministry of Energy and Mines • A new Ministry of Energy and Mines (MEM) was created in 2013, to be launched in 2014 • Responsible for State policy in mining, oil and gas, renewable energy, conventional power in the country. • Responsible for monitoring, evaluation and control of policies and strategies for mining and energy. • It’s integrated by five viceministries of Energy and one viceministry of Mines.

  7. Mining Office • Receives and process request of concessions for mining exploration and extraction. • Recommends to Minister of Energy and Mines to grant mining concessions. • Manage Mining Cadastre. • Supervise all concessions granted by Dominican Government. • Has operational independence and budget supervision from Ministry of Energy and Mines

  8. National Geological Service • Conduct geological studies for government • Investigate geological risks of the country. • Develop geological maps. • Indentify mineral resources. • Provide geological basic information for mining • Has operational independence

  9. Affiliated Offices to Ministry of Energy and Mines

  10. Barrick Gold Pueblo Viejo ProjectContractRenegotiation Case

  11. Barrick Gold Pueblo Viejo Mine • Deposit of gold, silver, copper and zinc owned by Dominican State. • Metallurgical plant owned by Barrick Gold and Gold Corp built with an investment of US$ 4.4 billion.Started in August 2012. • Proven reserves of 25.3 Moz. of gold 160.2 Moz. of silver and 591 Mlb. of copper. Potential reserves up to 38 Moz. of gold. • The estimated annual production for the next five years is 1MMoz gold and 5 Moz. of silver. • Pueblo Viejo mine is one of the largest gold deposits in Latin America.

  12. Barrick Gold Original Contract Terms • 3.20% Royalty as Gross Melting Return, to be paid since mine start up in 2012. Consequently 96.8% of all mine total cash flows would be handled by investors • Accelerated depreciation of 40% • Repayment by 2016 of all capital invested before share profits. • 25% income tax (IRS), payable only after 2016 • 28% net earnings participation (NEP), to be paid only only after 2019, when the project reach 10% investment return. • This means that Dominican government would only receive RD$377 millions out of US$8 billions of gross income for 2012-2016 period.

  13. Barrick Gold AmendmentstoContract • Elimination of internal rate of return of 10% a year as a prerequisite for payment Net EarningsParticipation (NEP) • Depreciation rate reduced from 40% to 15% • Reduction from US$4.477 millions to US$ 3,795.5 millions as Barrick capital investment recognition • Repayment of all capital invested in 2026 instead of 2016. • Reduction of interest rate on loans from Barrick subsidiaries from Libor plus 9.9% to Libor plus 3%

  14. Amendment to ContractAnnual Minimun Tax (AMT) • A new Annual Minimiun Tax (AMT) on gross sales was created to collect IRS and NEP taxes. This tax is collected on top of the 3.20% of gross sales as royalty • A table was calculated starting at a gold price of US$800/oz where no minimum tax apply. Every US$50 gold price range increase, generates an AMT increase, starting at 1.35% from golf price of 800 to 850 dollars per ounce, which keep increasing up to 23.05% at a gold price in the range of US$1,600 to US$,1650 and ending at 32.55% for gold prices over US$3,000/oz. . This table will apply from 2013-2016

  15. Amendment to ContractAnnual Minimun Tax (AMT) • A new AMT table of rateswillberecalculatedfrom a revisedfinancialmodel of mine plan, every 3 yearsstarting 2017, dividingthe 90% of projectedtaxes of incometax (IRS) and Net EarningsParticipation(NEP) byestimatedgross sales of gold per year at everypricerangebetween US$800 and US$3,000 • Barrick Gold can declare Force Majeure to not pay AMT tax, in the event of high price of fuel oil for 90 consecutive days divided by the price of gold is over to 0.16. • This tax regime secure an annual minimum income to Dominican government equivalent to the 90% of projected IRS and NEP taxes, no matters Barrick Gold declares no earnings in the period.

  16. Re Negotiation Outcomes • Government earnings to be received since 2012 mine start up. • Increase government revenue from US$ 9,900 millions to US$11,615 millions at a gold price of US.$1,600/oz • Increase government share on LOM profits from 37.1% to 51.3% • Increase government revenue in the period 2013-2016 from US$ 377.4 millions to U.S. $ 2.200 millions at gold price of $1,600,

  17. Negotiation Outcomes • The investor companies Barrick Gold and Gold Corp accepted this new terms, to garantee their operation of Pueblo Viejo Mine for at least 25 years of mine life. • Both parties and all stakeholders, believe this new contract is fair enough to be very sustainable and stable in the long term

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