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Miners say security "tax" excluded in Mexico royalty calculus

Friday, April 26th

"The mining industry is under attack," said Keith Neumeyer, the chief executive officer of First Majestic, a Canadian silver miner that spends about 10 percent of its annual budget on security costs. "We have armed guards around all of our mines; 10 years ago we didn't have any security."

"It's just the cost of doing business in Mexico," he added. "We have no choice."

Now, with prices falling and the royalty set to bite into profits, that cost is rising, and First Majestic has had to adjust its strategy accordingly.

In the last couple of weeks, the company cut its 2013 Mexico investment budget by more than 15 percent to $160 million, citing falling metals prices, the new royalty tax and the cost of guarding its assets and workforce.

Last year, Neumeyer said, First Majestic lost about $4 million worth of silver concentrate in hijacked trucks. They fly their heavier silver bars out of the country, and are now looking at moving more of their business abroad.

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