Commentary: Quebec’s evolving mining regime – by Madeleine J.M. Donahue and Jean Piette (Northern Miner – September 26, 2013)

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry. 

Quebec has been making further strides in updating its mining regime to reflect the province’s needs, realities and political priorities.

The Quebec government recently took three major steps towards this goal by: tabling a proposal in May 2013 to change the mining royalty regime; introducing Bill 43 on May 29, 2013, to replace the current Mining Act, which dates back to 1987; and passing amendments on July 23, 2013, to the Regulation to amend the Regulation respecting mineral substances other than petroleum, natural gas and brine in order to set new rules concerning the financial guarantees required for the restoration of mining sites.

Mining royalties

In May, the government tabled its proposal to change the mining royalty regime to increase the return on mining royalties for Quebec. It decided to require all mining operators to pay a minimum mining royalty, called the minimum mining tax, and a progressive tax on mining profits. The minimum mining tax will be 1% of the total output at the shaft head below or equal to $80 million and 4% of each dollar in excess of the $80 million threshold. The minimum mining tax paid can be carried forward and applied against the tax on future mining profits.

In 2011, half of the 20 mining companies operating mining fields in Quebec did not attain the profitability threshold at which mining tax is payable under the current regime. The new regime will subject them to a new tax burden.

The mining tax on profits will be 16% for mining companies with a profit margin between 0% and 35%, 22% for mining companies with a profit margin between 35% and 50%, and 28% for mining companies with a profit margin between 50% and 100%.

According to government figures, the new mining royalty regime should allow the government to collect $376 million in revenues in 2015 — $56 million more than the current mining tax regime would generate. When corporate income tax and the mining tax on profits are taken together, the new Quebec regime represents a combined taxation rate between 38.6% and 42.4% depending on a company’s profit margin, compared to a rate of 32.5% in Ontario and 45.8% in Australia.

The new royalties are expected to come into effect on Jan. 1, 2014.

A new Mining Act

Bill 43, tabled on May 29, 2013, is the third attempt to reform Quebec’s mining legislation since 2010. Bill 43 contains most of the amendments proposed in Bill 79 and Bill 14 but also adds some new concepts, resulting in: 1) stronger recognition of sustainable development as the “perspective” for mining development in Quebec;

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