Lets face it, Cameroon and Congo are not the most sophisticated of places.
But one would imagine that both respective governments would want a fair return on letting foreigners plough and pillage their respective country's resources.
I have waited all day for some cocky to come up with talk of transfer pricing, but it did not happen.
For those who dont know about transfer pricing, in a nutshell, it is the practice of shifting profits to different tax jurisdictions (lower tax rate jurisdictions usually). This can be done where the seller "manages" the selling price in one country, which affect buyers cost price in another country, causing profit to be distributed from one country to another. Most governments usually expect that cross border transactions must be executed at arms length prices to ensure that an adequate return is being received by the "selling" country.
The Mbalam convention, as we last knew it, had given a 5 year tax free to the project. We can only assume that the Congo Convention does the same.
Now relating this back to your comments RVINTL, do you really think that these governments will allow "non market based" revenues to be received in country for the next 25 year?
You suggest that it is entirely likely that $65-$20=$45 profit per tonne, might be the revenue attributable to the Cameroon & Congo countries even if the actual market price of IO is $100, say? We are in the middle of an IO price spike here, and one would hope that this will be front and centre with the 2 governments minds when allowing foreigners to use their land.
It is a tough call for the government of cameroon & congo to forgo that much potential tax revenue on top of a 5 year holiday. But like I said, these countries are not sophisticated.
Happy to hear comments, but this is reality also.
HB
SDL Price at posting:
47.0¢ Sentiment: LT Buy Disclosure: Held
