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Between a hard rock and the royalties

Between a hard rock and the royalties In response to Keith Halliday's column (Yukon News, Sept 28) regarding royalties and taxes on hardrock mines the Yukon Conservation Society wishes to offer an alternative viewpoint. It is very important to recognize

In response to Keith Halliday’s column (Yukon News, Sept 28) regarding royalties and taxes on hardrock mines the Yukon Conservation Society wishes to offer an alternative viewpoint.

It is very important to recognize there is a world of difference between royalties and taxes.

Mining royalties are what is owed the government in order for the miner to claim ownership of the extracted minerals. Without payment of the royalties, there is no ownership.

It is sometimes forgotten the minerals in the ground belong to all of us as represented by our government, and when a miner stakes the land they only obtain the right to look for and extract the minerals.

They do not own the minerals until such time as the royalty is paid.

Royalties are the payment due to society for the nonrenewable resource that has been removed forever from the public ownership.

Taxes, well, we all know what taxes are. It is what the government gouges out of our income (be we individuals or corporations) once a year to fritter away on such things as health care, law enforcement, education, roads, etc. It is based on our income, irrespective of where that income comes from.

If a corporation earns an income from selling metal, it pays taxes on that. If it earns an income on selling assets such as bulldozers, it pays taxes on that.

To recap, royalties are what miners pay to the government in order to own the minerals that originally belonged to all of us. Taxes are what we all pay on income no matter where it comes from.

As an aside, the federal Department of Natural Resources study that claimed to show the Yukon has the highest combined taxes and royalties on hardrock mining was only on base metals such as lead and zinc. It was not on precious metals such as gold and silver.

The Yukon royalty regime on hardrock mines on government land is available online. These mines pay a royalty based on a share of profits. It is paid by a mine operator to the Yukon government. It is not a tax.

Mines on Yukon government land pay a royalty based on profit. It would appear that in any given year the following deductions from profits can be made prior to assessing royalties.

The deductions include the following as long as they were incurred during the calendar year the royalties are being calculated for: the operation and maintenance costs of mining on the mining property; the operation and maintenance costs of processing minerals produced from the mining property; costs incurred to purchase tangible assets of the mine; exploration costs incurred during the calendar year on the mining property; and development costs on the mining property or other land used in the operation of the mine.

In addition, deductions also include the cost of insurance premiums; the costs of storing and handling the minerals produced from the mining property, including the costs of transporting them; the costs of sorting, valuing and selling the minerals produced from the mining property; and the costs of reclamation on the mining property or other land used in the operation of the mine conducted in accordance with the licence.

Once all those deductions are made from the mines’ gross profit, any funds left over are then subject to the Yukon’s hardrock placer royalties.

The one mine operating on Yukon government land for which financial information is available is the Bellekeno mine.

According to that mine’s owners, in a press release dated September 15, the Bellekeno mine had a gross profit of $15.8 million over its first six months of commercial production.

This was on sales of 7,956 tonnes of lead-silver and zinc concentrate. From this there was production of 911,848 ounces silver, 7,756,426 pounds lead and 3,104,303 pounds zinc.

Silver is quite a valuable metal these days, trading at over $30 an ounce.

Due to the recent operations of the Bellekeno mine, over 900,000 ounces of silver have been removed from the Yukon forever. It is not going to grow back.

Given all the deductions available to the operators of the mine it will be very interesting to see what, if any, royalty is paid to the Yukon for those 900,000 ounces of silver.

Lewis Rifkind, mining co-ordinator

Yukon Conservation Society

Whitehorse