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of the revision of the 1960 Mining Concession Agreement, in
1973/74 the Liberian Government could not share in the dividend
paid on this Preferred Stock after 1974, some $ 668,000.00 per
year, as it did in the case of the Swedish investors. A 25? tax
on these dividends was therefore imposed with the 1974 Amendatory
Agreement to the Mining Concession Agreement (51). L.1.0.'s
approval of this arrangement is explained by external factors.
The Canadian-registered holding company had always been exempted
from Canadian taxes but in keeping with internal tax legislation
in Canada in the early 197O's the company had become taxable in
Canada on the interest received from LAMCO, as the Swedish LAMCO
Syndicate always had been in Sweden. As under the new legislation
in Canada the dividends which it was to receive on Preferred
Stock would still be exempted from taxes L.1.0. easily agreed
upon the conversion of its debentures into Preferred Stock and a
25? Liberian tax on the dividends payable on this Preferred
Stock (52). In 1974 negotiations started for a Canadian-Liberian
Double Taxation Treaty in view of the shortly expected general
tax liability of L.1.0. in Canada. Although it is clear that the
Swedish LAMCO Syndicate and L.1.0. had not been inspired by
altruistic motives, the Liberian Treasury through these fiscal
arrangement yearly (1974-1977) gained an amount of nearly $ 1
million.
The costs of financing the mining venture with borrowed funds
were not limited to the foregoing. As a result of LAMCO's
excessive reliance on non-equity capital the Company's major
lenders had made their loans conditional upon the provision that
over a number of years LAMCO would set aside about 50? of its
yearly profits as a capital reserve. As early as 1964, however,
it was openly acknowledged that such a practice would hamper the
yearly payments of dividends and on January 1, 1965 an agreement
was concluded under which the Swedish LAMCO Syndicate guaranteed
the Company's debt to certain non-affiliated companies against a
yearly fee of $ 300,000.00 (payable on a quarterly basis).
L.1.0. was to pay this fee but it would be reimbursed 50? of the
amount by LAMCO. Under the 50? profit-sharing arrangement in
LAMCO the Liberian Government thus contributed indirectly to
this paid guarantee, viz., $ 75,000.00 a year. The agreement of
January 1, 1965 will expire on December 31, 1980 (53).
Royalty payments (54)
The 1974 Amendment of the 1960 Mining Concession Agreement also
introduced the payment of a royalty. It was agreed that the
insertion of a minimum royalty provision would assure the
Government of a minimum revenue each year, regardless of the
profit level of the Company. Royalty payments were determined at
4? of LAMCO's net sales of iron ore and iron ore products during
each quarter. However, as a result of the Government's 50?
ownership of LAMCO the effective royalty payments amounted to