Chile

CHILE

BHP Billiton Confirms Escondida To Pay Chile Royalty

by Dow Jones (London)

9th March 2006

BHP Billiton (BHP) confirmed Thursday it has agreed to pay Chile's recently introduced tax on mining, known as royalty, stressing it is "in Chile for the long term."

"This outcome finally closes the already long lasting debate around the mining taxation in Chile, and it also ratifies Escondida's and its owners' contractual rights under the foreign investment statute DL 600," company spokeswoman Ariane Gentil told Dow Jones Newswires.

The royalty is a 5% levy on the operating profits of mining companies that produce more than 50,000 metric tons of copper a year.

According to the mining tax law ratified in May 2005, foreign mining companies could choose between maintaining a guaranteed 42% income tax rate or pay a 35% tax along with a royalty.

The decision to pay the royalty reverses Escondida and BHP Billiton's previous stance that it wouldn't pay because one of the mine's minority shareholders, a Japanese consortium led by Mitsubishi Corp. (8058.TO), opted for the guaranteed rate.

The decision also "recognizes that Escondida did not have the obligation to pay the royalty under the mining tax law of 2005, and it provides the original incentives under the law for those companies that opted into the regime by November 2005, plus gives additional incentives under the new law," Gentil said.

"We are currently assessing what the financial impact of this will be on the BHP Billiton group," she added.

Gentil said Escondida has paid $3 billion in income taxes over the last 15 years and is, and will continue to be, an "outstanding corporate citizen."

Escondida is owned 57.5% by Anglo-Australian mining giant BHP Billiton PLC, 30% by Anglo-Australian Rio Tinto PLC (RTP), 10% by the Japanese consortium, and 2.5% by the International Finance Corp.