Mining royalties at record high

The mines brought in almost 1 billion to the Quebec Treasury in 2021, a year marked by the vertiginous rise in the price of iron.

Royalties reached 926 million in 2021, a high since 2014, when data by mine became public. In one year, the increase in rights paid exceeds 46%.

In 2020, the corresponding amount was 631.7 million.

Until the last budget, mining royalties were paid into the Generations Fund to reduce the debt. Starting this year, they will be used to fund personal income tax reductions.

So goes the price of raw materials, so go the royalties. From 2014 to 2016, royalties brought in barely 100 million a year to the state.

The document on the 2021 statistics was released Thursday by the Ministry of Energy and Natural Resources (MERN).

As in the past, some fees are paid in Canadian dollars, others in US dollars. To put everything back in Canadian dollars, we took the average annual exchange rate published by the Bank of Canada.

The bulk of the royalties come from the iron and gold mines.

The price of gold has averaged US$1,799 per ounce in 2021. As for the price of iron, which has recovered from its low in 2015, it has averaged US$162 per tonne, according to the Statista.com website.

Since the price of materials is expressed in US dollars, the exchange rate must also be taken into account. In 2021, US$1 was worth C$1.2535 on average.

The highest paying mines

The highest-paying mine in Quebec is the Mont-Wright iron mine, with duties paid of 335.4 million (175.5 million in 2020). It is followed by the Lac-Bloom iron mine, of Quebec Iron Ore, with rights of 137.4 million (130.6 million in 2020). In third place, the Canadian Malartic gold mine, with royalties paid of 123.4 million (87.9 million in 2020).

The 2022 results, which will be released in March 2024, are likely to prove weaker as the price of iron fell back to US$120 per tonne that year.

“The decrease in revenues from rights and permits in 2022-2023 and in 2023-2024 is mainly explained by lower mining revenues over this period, due to the expected decrease in metal prices, mainly iron ore” , warned the provincial government in its March 21 budget.

The document also reports the production of strategic and critical minerals.

Mining rights

It should be noted that an operator is required to pay mining duties corresponding to the higher of his minimum mining tax and his mining tax on his annual profit, for the fiscal year.

For the minimum tax, Quebec requires the payment of duty of 1% with respect to the first tranche of $80 million of production value at the wellhead and of 4% on the value that exceeds $80 million. The notion of value at the pithead is equivalent to the gross value of the annual production minus the expenses incurred after the ore leaves the mine.

As for the mining tax on the annual profit, the rates applicable to the annual profit vary from 16 to 28% depending on the profit margin. If the margin is less than 35.01%, a rate of 16% applies; above 35%, it is 22%. Finally, a profit margin of 50.01% or more commands a rate of 28%.