Royalty rates could drop for mining companies

To make the Yukon more competitive, the government is considering lowering royalty rates and making it easier to stake claims in the territory.

To make the Yukon more competitive, the government is considering lowering royalty rates and making it easier to stake claims in the territory.

The federal government created the Quartz Mining Act in the 1920s. The territorial government adopted it virtually verbatim during devolution.

The legislation is outdated and doesn’t serve Yukoners or mining companies looking to invest here, said Greg Komaromi, assistant deputy minister for the Energy, Mines and Resource department’s mineral division.

“The legislation makes the Yukon one of the most expensive areas in the country to explore.”

Government royalties need to be capped if the companies are going to invest exploration money in the Yukon, said Komaromi.

“If you’re earning $100 million in the Yukon, the royalty rate is very, very high, something in the order of 31 or 32 per cent.”

“I don’t think there’s a single jurisdiction in Canada that has an uncapped royalty rate.

“What we want to be able to do is to ensure our royalties are competitive with royalties in the rest of Canada.”

Uncapped royalties deter some companies from coming here because it makes large mining projects economically unviable, he said.

Currently, resource revenue for hard rock minerals and other resources such as timber is shared with the federal government.

The sharing agreement with Ottawa sees Yukoners keeping the first $3 million of all revenues collected, but everything after that flows to Ottawa.

Companies pay a set percentage in royalties for the first few million they make and then royalties go up one per cent for every $5 million after that.

Other jurisdictions, such as the NWT, have stopped that practice, said EMR’s mineral director, Bob Holmes.

The NWT’s royalties are capped at 14 per cent.

“Ours just keep going,” said Holmes.

“If you get enough of a profit you’re paying 100 per cent royalty on that last $5 million.

“If you have a $200-million profitable mine in the Yukon, that last $5 million you might be paying 50 or 60 per cent royalty.”

Energy, Mines and Resources officials are also looking to have cabinet consider changing staking requirements in the Quartz Act, said Komaromi.

“Our claims administration provisions are making the staking and maintaining and administration of mining claims inordinately expensive.

“In order to stake a quartz claim in the Yukon, you need to essentially make two trips to do that.

“You have to go out and stake the thing, then you have to come back into the mining recorder’s office to get your tags and then you need to go back out to place the tags on.”

That makes exploration in remote areas very costly, he said.

Officials are looking to make staking easier, but will not be recommending changes to the free-entry system, said Komaromi.

Proposed changes will go out for public consultation and must be approved by cabinet, he added.

Changes to the quartz act could be good news for business, said Carl Schulze, president of the Yukon Chamber of Mines.

“I would say if royalties were capped, mines could operate at a higher profit margin, which would make them more viable,” said Schulze.

“Some mineral prices are very volatile.”

Changes to staking would also be welcome as long as they don’t have an impact on the free-entry system that allows prospectors to stake on any available Crown land.

Royalty rates are an issue, but it’s difficult to comment on the government’s proposal without more information, said Gerry Couture, mining co-ordinator for the Yukon Conservation Society.