Argentina's president Mauricio Macri last week announced the measure as part of a larger plan to deal with the growing economic turmoil. Argentina is proposing a tax of 12% on all goods exported from the country, with the tax capped at four peso for each US dollar of bullion and unrefined gold and at three peso for each dollar of unrefined silver, copper and precious metals ores and concentrates.
Yamana, which has two operating mines in the country - Gualcamayo and the Cerro Morro mine, the latter which poured first gold in May - warns the new export tax could offset some of the forecast gains this year. Cerro Morro is expected to underpin its planned step change in cash flow, after declaring commercial production in June.
A newly announced programme to lock in foreign exchange benefits and continued strong production momentum at its mines, are positioning the company well for the rest of the year, and more significantly into 2019, it says.
"Our view is that the announced tax is not effective before being approved by the legislature. To date, no legislation has been introduced in the federal congress to make the proposed tax effective and give it constitutional sanction. We are also evaluating the impact of our fiscal stability pacts on the proposed tax as those pacts limit taxes to those set forth in the pacts," president and CEO Daniel Racine said.
"Clearly, we understand the objective of fiscal stability in the country and that the proposed tax is directed toward that objective. As such, we are working within established channels to seek a constructive resolution to this matter on many fronts, including if and how the tax, if and when enacted as legislation, would apply."
Yamana will challenge the new measures through its indirect subsidiaries Minas Argentinas and Estelar Resources, arguing the actions are unconstitutional. It will file an action for the protection of constitutional rights pursuant to Article 43 of the Argentine Constitution, and an application for an injunction for the Argentine government to refrain from collecting this tax.
Yamana further points out the Gualcamayo and Cerro Moro mines, owned by Minas Argentinas and Estelar Resources, respectively, are entitled to tax stability pursuant to Argentina's Mining Investments Law. Such tax stability entitles Minas Argentinas and Estelar Resources. to recover taxes in excess of their overall tax burden at the time of the filing of their feasibility studies, in 2007 for Gualcamayo and 2012 for Cerro Moro.
Yamana's equity has been bleeding since the September 3 Argentina announcement, losing 17% in the period to Tuesday. However, it regained some lost ground Wednesday, closing 2.83% higher at C$3.27 a share, giving the company a market valuation of C$3.1 billion.
