Reuters reported that Peru's government and miners are discussing the implementation of at least two different rate scales for a new royalty payment system.

The miners proposed that projects without tax stability agreements pay rates between 2% and 14% of their operating profits. Projects with agreements would pay between 1% and 7%.

However, the government has said the rates would need to be higher in order to bring in the amount of money it seeks, meaning the scales could be expanded or a third range could be added.

One mining source said that "To get our curve to yield the amount desired by the state, the rates will need to be modified, that's what's under discussion."

Many large firms in Peru have tax stability agreements that were negotiated in the 1990s to shield their projects from new taxes imposed by future governments.

Prime Minister Mr Salomon Lerner said that both sides had agreed the new royalty would raise around USD 1 billion annually. Securing new funds from lucrative mining firms to fund anti poverty initiatives was a key campaign promise from leftist President Ollanta Humala.

Financial analysts praised the announcement for being a reasonable sum and noted the relatively short time it took miners and the government to agree on a ballpark contribution.

Reuters reported earlier this month that miners and the government had agreed to change the royalties payment system so that it would be charged on operating profits rather than on sales, similar to the system in neighboring Chile.

Companies in Peru now pay royalties of between 1% and 3%, charged on sales. They also pay a 30% income tax. Minerals are some 60% of Peru's exports.

(Sourced from www.reuters.com)