Industry Comments – Mineral Royalty Guidelines

Mr Richard Montgomerie
Territory Revenue Office
Northern Territory Treasury
GPO Box 154
DARWIN   0801

Attention: Ms Anne Tan


Dear Richard,

Re: Industry Comments – Mineral Royalty Guidelines

Thank you for your letter of 11 July and the opportunity to make comment on the draft Mineral Royalty Guidelines.

As you’re aware the Minerals Council of Australia represents Australia’s exploration, mining and minerals processing industry, nationally and internationally, in its contribution to sustainable development and society. MCA’s member companies produce more than 85 percent of Australia’s annual mineral output.

Northern Territory members comprise more than 100 individual mining, exploration and service support companies operating in the jurisdiction and comprise 25 percent of the Territory’s gross state product, employing more than 4,600 people.

We have circulated the documentation accompanying your letter to our members inviting feedback, and comments received have been incorporated into this response. We have considered the draft Mineral Royalty Act and the new Guidelines and are pleased to make summary comments for your consideration, including the detailed comments contained in the attachment.

In summary, the Guidelines aim to clarify how the Territory Revenue Office will apply the Act, however we believe it would be useful if the Guidelines could provide further detailed clarification on the following key items:

  1. We raise a general issue regarding the treatment of operating costs versus deductions from gross realization which arises when the Saleable Mineral Commodity (SMC) requires further transport, storage or refining off-site. We suggest that transportation costs are being excluded from Operating Costs but the SMC is gold and silver, not the dore. To get the SMC it is necessary to undertake transport and refining and these are “Operating Costs”.
  2. Payments in the nature of royalties, specifically paragraph 52(2) of GR-MRA-005 (draft) which states that “negotiated additional payments over and above statutory royalties” are not allowable as operating costs. Is the intent to exclude as operating costs all payments agreed per sections 46(1) and 46(18) of the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth)? Refer to detailed comments contained referencing paragraphs 47, 50 and 52 under RG-MRA-005 in the attachment.
  3. We raise concerns regarding the proposed treatment of on-site entertainment to employees as a non-allowable deduction under RG-MRA-005 because it is not closely connected to the production, maintenance and purposes of production. This is inconsistent with current standards and the definition of operating expenses and we have also provided an example of the complexity of treating this separately.
  4. We also raise concerns regarding the treatment of payroll tax, site rehabilitation and costs associated with research and development activities such as “market research”, “market development”, efficiency surveys and suggest drafting changes to be clear that various remuneration / allowances are deductable if paid to or provided to employees.
  5. Clarification as to the “point in time” that feasibility study costs can commence to accumulate as Eligible Capital Asset Expenditure, specifically whether this is contingent on the lodgement of a Section 11 notice to the Secretary and the resultant implications resulting from the lodgement of the notice (e.g. commencement of the annual royalty return cycle): refer to detailed comments under RG-MRA-006 in the attachment.
  6. Whether exploration expenditure incurred by the production unit prior to the commencement of active operations (i.e. lodgement of a Section 11 notice) on mining tenements within the production units are considered Eligible Exploration Expenditure: refer to detailed comments under RG-MRA-008 in the attachment.
  7. An example of a method acceptable to the Secretary for the determination of the Gross Realisation of a mineral concentrate (copper concentrate for example) which has a final point of sale at an off shore smelter (e.g. in China): refer to our detailed comments under RG-MRA-004 in the attachment.
  8. It would be useful if the Guidelines were also broadened to address circumstances involving the start-up of old plant for a new mining operation.

Once again, thank you for the opportunity to provide our feedback and input into the development of the Guidelines. I look forward to your advice regarding how we might best move forward in line with your implementation timeframes.

Yours sincerely,

Peter Stewart
Executive Director

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