Quebec Mining

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MONTREAL — Most observers are describing Quebec’s new regime on mining royalties as a retreat from the election promises made last year by the Parti Québécois.

But while the damage isn’t as bad as first feared, the new policy adds up to a missed opportunity. At a time when mining investment is slowing down because of tumbling metal prices and weak interest from the financial community, mining operators need a boost from the Quebec government, not a hand reaching into their pockets.

Industry officials are disappointed that the new policy fails to take stock of the uncertain economic context facing the mining business.

“The cost of doing business is constantly increasing and adding another layer of taxation is certainly not the best policy,” said Michel Rathier, a consultant at KPMG Secor.

During the election campaign, the PQ promised to double the royalties on mining operations, arguing that companies were getting too sweet a deal compared with other jurisdictions around the world.

The party proposed a five-per-cent royalty on the value of production from each mine, whether it made or lost money, and a 30-per-cent “supertax” on profits above eight per cent.

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Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

As promised in the last provincial election, the Partie Québécoise has slapped new taxes on Quebec’s mining industry. Beginning in 2014 producers will pay either a royalty or a graduated tax on the company’s profit margin whichever is higher.

The royalty is set at 1% of the first $80-million-worth of production, and at 4% on amounts greater than that. It will apply to any mine regardless of profitability.

The graduated tax starts at 16% and rises to a top rate of 28%. This option claws back profits made at a given operation.

The new taxes are less than promised by the PQ during the election. They were scaled back from the $388-million target due to the recent softening of commodity prices. Nonetheless, the measures are expected to add between $73 million and $200 million to the provincial pocketbook each year.

The Quebec Mining Exploration Association (AEMQ) expressed disappointment at the new taxes. “The Quebec mining sector is already suffering from severe a financial crisis, and in the last few years, we have had to deal with significant mining taxes.

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http://www.miningweekly.com/

TORONTO (miningweekly.com) – Quebec Premier Pauline Marois and provincial Natural Resources Minister Martine Ouellet, on Tuesday outlined the province’s incumbent political party, Parti Québécois’ economic vision for developing the vast north, committing $868-million over the next five years to develop the region.

Marois, during a visit to the mining town of Chibougamau, said the bulk of the money would be spent on infrastructure, through creating the Nordic Development Fund.

“We want to develop the north responsibly to maximise the benefits for local communities and for all Quebecers,” Marois said.

Marois added government was proposing developing a new framework for funding related to infrastructure projects in the north, which would put forward practical and innovative solutions to ensure the wellbeing and the beneficial development of communities in the area, while simultaneously ensuring the harmonious and respectful development of the environment.

Investors were mostly in the dark about the government’s plans for Quebec’s north since Marois’s party defeated Jean Charest’s Liberals toward the end of last year. Marois had indicated she wanted to replace Charest’s Plan Nord project with her own vision for the territory but detail had been scarce until today.

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Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

MONTREAL — Premier Pauline Marois is going to great lengths to put the Parti Québécois’s imprint on the development of Quebec’s North.

Ms. Marois and three of her ministers travelled all the way to Chibougamau on Tuesday to meet the press in the small mining and forestry town that sits north of the 49th parallel, in what used to be Plan Nord territory.

But now it’s out with Plan Nord, Jean Charest’s signature economic project, and in with the “Nord pour tous” – North for everybody – as the PQ’s program is now called.

In a blind taste test, however, you would be hard pressed to tell the two plans apart. The government now says it will invest $868-million in infrastructure and social housing over the next five years, almost exactly what the Liberals had allocated to the roads and parks in the North. The only change is that private developers will have to assume a bigger share of the risk when they are the sole users of roads and railways – a flaw the PQ rightly corrected.

In essence, the Quebec government is barely rebranding a program so tainted in bright Liberal red that Ms. Marois’s eyes would hurt just looking at it. But there are some striking differences between the then and the now.

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Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

QUEBEC, MONTREAL – The Quebec government is boosting its take from a mining sector already beset by a global downturn, introducing minimum royalty payments and other tax increases aimed at generating up to $200-million a year.

Those increases are less than what the Parti Québécois promised during last’s year’s election campaign – an acknowledgment, the government said, that the drop in commodity prices meant it had to scale down its plans for increasing revenue from the sector.

The new taxes are in addition to existing federal and Quebec general corporate taxes.

According to the Quebec government, at least 10 mining companies didn’t pay any taxes to the province in 2011. The proposed changes, to take effect in 2014, take aim at those firms, requiring that any mining operation pay the higher of two fees: either a royalty on production (with a 1-per-cent tax on the first $80-million on the value of the mineral output, increasing to 4 per cent after that point) or a graduated tax based on a firm’s profit margin (starting at 16 per cent and rising to a top rate of 28 per cent).

Quebec Finance Minister Nicolas Marceau estimated that, depending on mining activity and profits, the new regime will increase government revenues between $73-million and $200-million a year in 2015. Mr. Marceau said that over the next 12 years, the province could increase cumulative revenues up to $1.8-billion.

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http://www.mineweb.com/

The Province of Quebec has eased up a bit on its original proposal for mining taxes (such as a 30% super-profits tax), but still intends to take a decent-sized chunk out of the sector’s profits.

RENO (MINEWEB) – The Government of Quebec Monday unveiled the province’s new mining tax regime, aimed at requiring all mining operations to pay a minimum mining tax in addition to existing federal and provincial general corporate taxes.

Beginning Jan. 1, 2014, mining companies would be required to pay the greater of a fixed mining tax or a tax on profit. A minimum annual fixed tax rate would be 1% for operations producing less than Cdn$80 million in ore, and 4% for those that have produced higher valued ore at the mine shaft head.

The profit tax would set a minimum rate of 16% for mines with a profit margin of 35% or less and would increase up to 22.9%, depending on mines with a profit margin of more than 50%. The current highest royalty rate is 16%.

While Parti Quebecois originally promised to raise an average C$388 million annually over five years in mining taxes, the 25% decrease in metal prices since 2011 forced the government to reconsider its strategy, said Quebec Finance Minister Nicolas Marceau. The new mining plan would increase royalties’ revenue by 15% to a total of $370 million annually.

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The ongoing downturn in commodity prices due to slowing economic activity in China and India is not good for the short-term growth prospects of Quebec’s Plan Nord. Under the circumstances, the Parti Québécois government needs to rethink its plan to extract dramatically higher royalty revenues from mining companies operating in this province.

As metal prices have fallen (down 6.7 per cent in March alone), investment by mining companies in Quebec has fallen by $700 million, the first drop in 10 years. Such is the backdrop against which the Marois government is preparing to table new legislation for the mining industry this spring. The government needs to be careful not to do anything in the bill that will discourage investment and job creation; that necessarily means more flexibility on the issue of royalties.

Throughout most of the last decade, mining royalties in Quebec were very low by international standards, bringing in only $40 million a year on average. On the other hand, those low royalties attracted investment, and are one reason why Quebec now has 23 large active mines, and an industry that employs 17,000 people whose annual wages can be in the $95,000 to $110,000 range.

Toward the end of the dramatic two-year rise in commodity prices in 2009 and 2010, the former Liberal government in late 2010 introduced a new 12-per-cent royalty on profits. And before last year’s provincial election, it raised that same royalty to 16 per cent, so that by last year, royalties had started to bring in some $190 million annually.

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