How CBC found the secret diamond royalty – by Rita Celli (CBC News Business – May 12, 2015)

For Rita Celli’s Ontario Today program on diamond mining, click here:

Ontario government breaches its own confidentiality rules to explain royalties for salt and diamonds

For stones prized for their brilliance and clarity, the true value of Ontario’s only diamond mine was murky — until the CBC investigation.

The Michener-Deacon Fellowship for Investigative Journalism allowed me the time to dive into Ontario’s opaque accounting.

For months, no one in the Ontario government or De Beers Canada would answer whether if, when, or how much of the legislated royalty was paid.

Both the current and a former provincial mines minister told CBC that the diamond royalty must be kept confidential. Preserving secrecy is spelled out in the Ontario Mining Act. Here’s how this mystery started to unravel.

I studied a variety of corporate and public accounts searching for an answer. At some point along the way, I figured out that three Ontario ministries collect a version of mining profits tax or royalties.

From a number of sources, I determined that the Ministry of Northern Development and Mines (MNDM) collects a royalty on salt.

No specific numbers

The public accounts are not specific. The revenue line only reads “Royalties.” I went back 12 years and each year the government appeared to collect between $2 million to $3 million.

To compound the mystery, Ontario’s Mines Minister Michael Gravelle told CBC he wasn’t even aware of a royalty being collected by his ministry. The royalty is “not his priority,” Gravelle said.

“If you work from the premise that I should be the one to know all these details. Precise things. That’s not the focus of my priorities in terms of minister. My focus is to be very much the person who goes out there and sells Ontario as an attractive destination for mining sector investment,” Gravelle said.

CBC persisted, asking for an explanation for the royalty payments to MNDM. Two weeks after the interview, an official from Ontario’s finance department confirmed salt and diamonds are lumped together in a generic “Royalties” line.

Then, the department went one step further — revealing via email that the salt royalty netted the province about $3.9 million in 2013-14, and the diamond royalty? $226!

The Ontario government had accidentally breached its own confidentiality provisions.

De Beers says the $226 may be correct. A company spokesman says the company is just paying off its $1 billion investment to build the mine and from now until it closes, the company expects to pay tens of millions of dollars in royalties.

Puzzling secrecy

The secrecy around the diamond royalty perplexed many experts CBC consulted, including a New York-based diamond analyst, accountants and auditors.

It raises important questions. Since the government promised that the diamond royalties would help enrich all Ontarians, “hiring more nurses,” according to then-premier Dalton McGuinty, how would citizens ever know? If the minister in charge of mines is in the dark, then who is protecting the interests of Ontarians?

The Victor diamond mine will close in four years. It’s been operating since 2007.

In 2011, the unmarked royalty jumps by 830 per cent. Since 2007, according to statistics reported by Natural Resources Canada, the total value of rough diamonds extracted is $2.5 billion.

Cracking the secret of the diamond royalty only deepens the conundrum. The figures are difficult to contextualize and raise more questions about tax credits and deductions perhaps, that are never disclosed in detail.

Arthur Cockfield, tax law specialist at Queen’s University says the lack of transparency “creates both suspicion and further mysteries for researchers and journalists like yourself.”

“You`re a very brave soul for tackling what I suspect other journalists would consider tantamount to spending an eternity in Dante`s ninth circle of hell,” he added.

“You`re the only one on planet earth that`s figured out it was that particular figure and now they`ve admitted it.”

The Ontario government declined to offer any comments on the fact that the CBC has uncovered the ‘secret’ diamond royalties.

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