Editorial: Quebec walks the line on mining royalties – Montreal Gazette Editorial (March 8, 2013)

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Next Friday, the Parti Québécois government will hold a forum to discuss increasing the royalties that mining companies pay the province on the minerals they extract here. Collecting more money from mineral resources could offset the provincial debt and help pay for the generous social programs that Quebecers enjoy.

Currently, mining companies in Quebec pay 16 per cent of their profits in royalties, a rate set by the previous Liberal government.

But one of the planks in the PQ’s platform in the last provincial election was to raise royalty rates. It called for royalties to be 5 per cent of the gross value of the minerals extracted (whether a mine was profitable or not), plus a 30-per-cent tax on “unusually high profits” whenever they appear. (What constitutes “unusually high profits” has not been spelled out.)

Taken together, these charges would result in much higher payments to the government by the mining companies, and the companies have not hesitated to express their displeasure at the proposal.

In a consultation document that Natural Resources Minister Martine Ouellet released Thursday in advance of next week’s summit, she again cites the PQ’s 5/30 royalty proposal, while adding that “the government is seeking a long-term good relationship with the mining industry to ensure its stability and equity.” The minister wants “a constructive dialogue with the mining companies,” the document adds.

Environmental groups will also attend the forum and were quick to react to the consultation document, supporting Ouellet’s call for a more lucrative hybrid royalty to end what they termed “the theft of our collective resources.” They also suggested that Quebec reduce the amount the companies can deduct for their exploration and operating costs when they calculate the profits on which they pay royalties.

Meanwhile, the Quebec Mining Association, the group representing the industry, says the present royalty regime should be left alone. It notes that Quebec’s ranking as an attractive place for mining has already slipped; the pro-business Fraser Institute rates Quebec as the 11th-most-attractive place for mining in the world, down from fifth place last year.

For a long time, Quebec let the mining companies off easy. In the 10-year period 2000 to 2009, before mineral prices rose sharply, Quebec collected a total of $396 million in mining royalties — less than $40 million a year on average. In 2010, the new 16-per-cent royalty netted $275 million, and the total rose to $351 million in 2011.

Mining plays an important role in this province’s economy. Quebec has 23 active mines, chiefly extracting gold, iron ore, nickel, copper and silver. There are 200 mining exploration companies and 17,000 mining jobs, paying an average of $96,000 to $110,000 a year.

For the rest of this editorial, please go to the Montreal Gazette website: http://www.montrealgazette.com/opinion/editorials/Editorial+Quebec+walks+line+mining+royalties/8070573/story.html

 

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