NOTE 4 — INCOME TAXES:

The income tax provision and the effective income tax rate for the first quarter 2017 and 2016 consisted of ($ in millions):

	2017			2016
Statutory income tax provision	$	148.5		$	82.6
Peruvian royalty	0.4			—
Mexican royalty	21.4			9.3
Peruvian special mining tax	5.9			0.4

Income tax provision	$	176.2		$	92.3


Effective income tax rate	36.3		%	33.8		%

These provisions include income taxes for Peru, Mexico and the United States. In addition, a Mexican royalty tax, a portion of the Peruvian royalty tax and the Peruvian special mining tax are included in the income tax provision. The increase in the effective tax rate for the first quarter of 2017 from the same period in the prior year is primarily due to an increase of forecasted dividends from Minera Mexico.

Peruvian income tax rate: In December 2016, the Peruvian Government enacted income tax law changes to both the income tax and dividend tax rate that became effective on January 1, 2017. The 2016 rates and the new rates are as follows:

Year	Income Tax Rate		Dividend Tax Rate
2016	28.0	%	6.8	%
2017 and later	29.5	%	5	%

Peruvian royalty and special mining tax: The mining royalty charge is based on operating income margins with graduated rates ranging from 1% to 12% of operating profits, with a minimum royalty charge assessed at 1% of net sales. If the operating income margin is 10% or less, the royalty charge is 1% and for each 5% increment in the operating income margin, the royalty charge rate increases by 0.75%, up to a maximum of 12%. The minimum royalty charge assessed at 1% of net sales is recorded as cost of sales and those amounts assessed against operating income are included in the income tax provision. The Company has accrued $5.5 million and $4.1 million of royalty charge in the first quarter 2017 and 2016, respectively, of which $0.4 million was included in income taxes in 2017; no amounts were included in income tax in the first quarter 2016.

The special mining tax is based on operating income and its rate ranges from 2% to 8.4%. It begins at 2% for operating income margin up to 10% and increases by 0.4% of operating income for each additional 5% of operating income until 85% of operating income is reached. The Company has accrued $5.9 million and $0.4 million of special mining tax as part of the income tax provision for the first quarter 2017 and 2016, respectively.

Mexican mining royalty: Mexico has a mining royalty charge of 7.5% on earnings before taxes as defined by Mexican tax regulations and an additional royalty charge of 0.5% over gross income from sales of gold, silver and platinum. The Company has accrued $21.4 million and $9.3 million of royalty taxes as part of the income tax provision for the first quarter 2017 and 2016, respectively. In the first quarter of 2017, the Company has paid $54.3 million for year 2016 mining royalty.

Accounting for uncertainty in income taxes: In the first quarter 2017, there were no changes in the Company’s uncertain tax positions.