Northwest Territories Mining Regulations (SOR/2014-68)

Royalties

Marginal note:Commencement of production of mine

• 68 (1) For the purposes of these Regulations, the date on which a mine commences production is

  • (a) if the mine includes a mill or concentrator, the first day of the first 90-day period during which the mill or concentrator operates at an average of at least 60% of its rated capacity; or

  • (b) otherwise, the day the mine begins to produce minerals in reasonable commercial quantities.

• Marginal note:Presumptions respecting mineral or processed mineral

  (2) For the purposes of these Regulations, a mineral or processed mineral is considered to

  • (a) be produced and be part of the output of a mine if the mineral or processed mineral is in a saleable form or has been removed from the mine; and

  • (b) form part of the output of the mine if it is produced from the reprocessing of tailings from a mine.

• Marginal note:Presumptions respecting related persons

  (3) For the purposes of these Regulations,

  • (a) if minerals or processed minerals that have been sold by an operator to a person not related to the operator are later sold to a person related to the operator, those minerals or processed minerals are considered to have been sold by the operator to a related person; and

  • (b) if minerals or processed minerals that have been sold by an operator to a person related to the operator are later sold to a person not related to the operator and proof of that sale is provided, those minerals or processed minerals are considered to have been sold by the operator to a person not related to the operator.

Marginal note:Royalties on value of output of mine

• 69 (1) Each fiscal year, the owner or operator of a mine must pay to the Crown royalties on the value of the mine’s output during that fiscal year in an amount equal to the lesser of

  • (a) 13% of the value of the output of the mine, and

  • (b) the sum of the royalties payable set out in Column 2 of the table to this paragraph for the dollar value of the output set out in Column 1.

    	Column 1	Column 2
    Item	Dollar value of the output of the mine	Royalty payable on that portion of the value (%)
    1	10,000 or less	0
    2	greater than 10,000 but not greater than 5 million	5%
    3	greater than 5 million but not greater than 10 million	6%
    4	greater than 10 million but not greater than 15 million	7%
    5	greater than 15 million but not greater than 20 million	8%
    6	greater than 20 million but not greater than 25 million	9%
    7	greater than 25 million but not greater than 30 million	10%
    8	greater than 30 million but not greater than 35 million	11%
    9	greater than 35 million but not greater than 40 million	12%
    10	greater than 40 million but not greater than 45 million	13%
    11	greater than 45 million	14%

• Marginal note:Royalties payable to Receiver General

  (2) The royalties payable to the Receiver General of Canada under subsection (1) in respect of a mine accrue during a fiscal year as the output of a mine is produced and must be remitted to the Chief not later than the last day of the fourth month after the end of that fiscal year.

• Marginal note:Joint and several liability

  (3) Subject to paragraph 74(1)(b), any person who was an owner or operator of a mine during the fiscal year in respect of which the royalties were payable is jointly and severally liable for the entire amount of the royalties payable in respect of the period during which that person was an owner or operator.

• Marginal note:Calculation of value of output

  (4) For the purposes of this section, the value of the output of a mine for a fiscal year must be calculated in accordance with the formula

  A + B – C + D + E + F + G + H – I + J

  where

  A

  is the total of

  • (a) the proceeds from sales, during the fiscal year, of minerals or processed minerals produced from the mine to persons not related to the operator, if proof of those sales is provided,

  • (b) the market value of any minerals or processed minerals produced from the mine that were sold or transferred to a person related to the operator, or to any other person if the proof of that disposition is not provided, and

  • (c) if the minerals or processed minerals produced from the mine are precious stones that have been cut or polished before their sale or transfer, the market value of those precious stones before they were cut or polished;

  B

  is the market value of any inventories of minerals and processed minerals produced from the mine, as at the end of the fiscal year, determined under subsection (9);

  C

  is the market value of any inventories of minerals and processed minerals produced from the mine, as at the beginning of the fiscal year, determined under subsection (9);

  D

  is the lesser of

  • (a) the amount of any payment received during the fiscal year that is related to a cost that has been claimed as a deduction or allowance under this section, and

  • (b) that cost;

  E

  is any excess amount referred to in paragraph 70(5)(b);

  F

  is any amount withdrawn, during the fiscal year, from a mining reclamation trust established in respect of lands to which these Regulations apply, up to the maximum of the total of the amounts contributed to the trust;

  G

  is the amount of any proceeds received, during the fiscal year, from insurance on minerals or processed minerals produced from the mine;

  H

  is the amount of any grants in respect of the mine that were made to the operator, or of any loans to the operator in respect of the mine that were forgiven, by the federal government during the fiscal year;

  I

  is the total of the deductions and allowances claimed under subsection 70(1); and

  J

  is the total of

  • (a) the amount by which the sum of the amounts referred to in paragraphs 70(8)(d) and (9)(e) exceeds the undeducted balance of the depreciable assets eligible for a depreciation allowance at the end of the fiscal year, and

  • (b) the amount by which the sum of the amounts referred to in paragraphs 70(9)(c) and (d) exceeds the undeducted balance of the development allowance at the end of the fiscal year.

• Marginal note:Joint venture — determination of value of A

  (5) For the purpose of determining the value of A in subsection (4), if a mine is operated as a joint venture whose members deliver separate mining royalty returns under subsection 74(1),

  • (a) a diversion of any or all of the production of the mine from one member of the joint venture to another does not constitute a sale or transfer for the purposes of subsection 77(2), even if consideration is paid for the diversion; and

  • (b) any consideration paid to the member from whom the production was diverted must be included by that member as proceeds of sale of minerals or processed minerals produced from the mine.

• Marginal note:Certain costs and values excluded

  (6) Costs related to the production of or value for minerals or processed minerals from lands other than lands to which these Regulations apply must not be taken into account for the purposes of determining the values of A to D, G and I in subsection (4).

• Marginal note:Last year of production — option for calculation

  (7) In the case of a mining royalty return for the last fiscal year of production of a mine, the operator may, for the purpose of determining the value of B in subsection (4), elect to use the actual proceeds from the sale to a party not related to the operator of minerals or processed minerals in inventory at the end of the fiscal year, if proof of that sale is provided, rather than the market value of the inventory of minerals or processed minerals at the end of that fiscal year as required under subsection (4).

• Marginal note:Election is irrevocable

  (8) An election made under subsection (7) is irrevocable.

• Marginal note:Market value of precious stones

  (9) If the minerals or processed minerals referred to in paragraphs (b) and (c) of the description of A, and in the descriptions of B and C, in subsection (4) are precious stones, the market value of the precious stones is as follows:

  • (a) if the mining royalty valuer and the operator agree on a value for the stones, that value; or

  • (b) if the mining royalty valuer and the operator cannot agree on a value for the stones, the maximum amount that could be realized from the sale of the stones on the open market after they are sorted into market assortments.

• Marginal note:Timing of market value of precious stones

  (10) For the purpose of subsection (9), the market value must be determined

  • (a) when the value is calculated for inventory purposes, at the beginning or end of the fiscal year; and

  • (b) when the value is calculated for any other purpose, as of the last time the precious stones were valued by the mining royalty valuer.

• Marginal note:Market value of other minerals

  (11) If the minerals or processed minerals referred to in paragraphs (b) and (c) of the description of A, and in the descriptions of B and C, in subsection (4) are not precious stones, their market value is the price that could be obtained from their sale to a person who is not related to the operator.

• Marginal note:Timing of market value of other minerals

  (12) For the purpose of subsection (11), the market value must be determined

  • (a) when the value is calculated for inventory purposes, at the beginning or end of the fiscal year; and

  • (b) when the value is calculated for any other purpose, at the time the minerals or processed minerals are shipped from the mine.

• Marginal note:Exclusion respecting hedging transactions

  (13) Gains and losses from hedging transactions must not be included in calculating the value of the mine’s output.

• Marginal note:Exchange rate

  (14) For the purpose of these Regulations, the Bank of Canada’s noon exchange rate must be used to convert foreign currencies into Canadian dollars

  • (a) as of the date of that transaction if a transaction is carried out in a foreign currency; and

  • (b) as of the last day of the fiscal year if inventories have been valued in a foreign currency.

• Marginal note:Operating costs for operations outside Canada

  (15) When operating costs are incurred for operations outside of Canada, the operator may convert foreign currency transactions for those costs into Canadian dollars using the Bank of Canada’s average noon exchange rate for the month in which those costs were incurred.

Marginal note:Deductions

• 70 (1) In calculating the value of the output of a mine for a fiscal year, only the following deductions and allowances may be claimed:

  • (a) the costs, incurred during the fiscal year, of sorting, valuing, marketing and selling the minerals or processed minerals produced from the mine;

  • (b) the costs, incurred during the fiscal year, of insurance, storage, handling and transportation to the processing plant or market, in respect of the minerals or processed minerals produced from the mine;

  • (c) the costs, incurred during the fiscal year, of mining and processing minerals or processed minerals from the mine;

  • (d) the costs, incurred during the fiscal year, of repair, maintenance or reclamation at the mine;

  • (e) the consideration paid by a member of a joint venture for minerals or processed minerals diverted from another member of the joint venture, when each member is delivering a separate mining royalty return in accordance with section 74;

  • (f) general and administrative costs incurred during the fiscal year for property, employees or operations at the mine that are not otherwise allocated to operating costs;

  • (g) exploration costs incurred during the fiscal year by an owner of the mine, other than on the mining property, if those costs have not been otherwise claimed as an allowance or deduction under these Regulations, in an amount not greater than 10% of the value of the output of the mine multiplied by the owner’s share of that output, calculated

    • (i) after deduction of the costs referred to in paragraphs (a) to (f), and

    • (ii) before the deduction of any depreciation allowance, mining reclamation trust contribution allowance, development allowance or processing allowance;

  • (h) subject to subsection (5), paragraphs (8)(d) and (9)(e) and subsection (10), a depreciation allowance for the depreciable assets of the mine, and for the depreciable assets of any facilities located outside the Northwest Territories that are used for the processing of minerals or processed minerals produced from the mine in an amount not exceeding the undeducted balance of the cost of those depreciable assets at the end of the fiscal year of the mine;

  • (i) a development allowance, not exceeding the undeducted balance at the end of the fiscal year of the mine of

    • (i) exploration costs incurred, before the date of commencement of production, on the mining property as constituted on the date of commencement of production and not deducted under paragraph (g) in respect of any other mine,

    • (ii) all costs incurred before the date of the commencement of production for the purposes of bringing the mine into production less the total of

      • (A) the value of any minerals or processed minerals produced from the mining property that were sold or transferred before the date of commencement of production, calculated in accordance with section 69, and

      • (B) the market value of any minerals or processed minerals produced from the mining property that are in inventory on the date of commencement of production, calculated in accordance with section 69,

    • (iii) exploration costs incurred on the mining property after the date of commencement of production,

    • (iv) costs incurred after the date of commencement of production for workings designed for continuing use, including the clearing, removing or stripping of overburden from a new deposit at the mine, the sinking, excavation or extension of a mine shaft, main haulage way or similar underground workings, the construction of an adit or other underground entry and the construction of a road or of tailings disposal structures at the mine, and

    • (v) if minerals or processed minerals are being produced in commercial quantities from a recorded claim or leased claim that was incorporated into the mining property after the date of the commencement of production of the mine, or from another mining property that was incorporated into the mining property on which the mine is located after the date of the commencement of production,

      • (A) if the claim or lease was purchased, the purchase price of the claim or lease or the amount referred to in clause (B), whichever is the lesser, or

      • (B) in any other case, the costs referred to in subparagraphs (i) and (ii) that were incurred on the incorporated claim or lease and that have not been previously claimed as a deduction or allowance under these Regulations;

  • (j) a mining reclamation trust contribution allowance, determined by the operator, not exceeding the undeducted balance at the end of the fiscal year of amounts contributed to the mining reclamation trust with respect to any environmental impact resulting from the mining of minerals from lands to which these Regulations apply;

  • (k) if minerals or processed minerals are processed by the operator of the mine before their sale or transfer, an annual processing allowance equal to the lesser of

    • (i) subject to subsection (2), 8% of the original cost of the processing assets used by the operator in the processing of the output of the mine during the fiscal year, and

    • (ii) 65% of the value of the output of the mine, after deduction of the amounts referred to in paragraphs (a) to (j); and

  • (l) if minerals or processed minerals from the mine are processed at another mine, or at any facilities located outside the Northwest Territories that are used for the processing of minerals or processed minerals produced from another mine that is owned by the operator or by a person related to the operator, the total of

    • (i) the amount of the costs of the other mine that are not deductible under paragraph (8)(b),

    • (ii) the amount by which the processing allowance for the other mine is reduced under paragraph (8)(c), and

    • (iii) the amount by which the undeducted balance of the original cost of the other mine’s depreciable assets is adjusted under paragraph (8)(d).

• Marginal note:Production or fiscal year less than 12 months

  (2) When a mine is in production for less than 12 months in a fiscal year or a fiscal year of a mine is less than 12 months,

  • (a) the deduction for processing allowance calculated under subparagraph (1)(k)(i) must be multiplied by one-twelfth times the number of months in the fiscal year that the mine was in production or the number of months in the shortened fiscal year, as the case may be; and

  • (b) each dollar amount in column 1 of the table to subsection 69(1) must be multiplied by one-twelfth times the number of months in the fiscal year that the mine was in production or the number of months in the shortened fiscal year, as the case may be.

• Marginal note:Deduction respecting related person

  (3) When the operator of a mine claims a deduction for costs incurred in a transaction with a related person, the costs allowed as a deduction under this section must be the amount of the actual costs incurred by the related person, exclusive of any profit, gain or commission to the related person or to any other related person.

• Marginal note:Depreciation allowance

  (4) A depreciation allowance may be claimed in respect of a depreciable asset in the fiscal year in which it is first used in the operations of the mine.

• Marginal note:Reduction in depreciation allowance

  (5) When an operator disposes of, or receives insurance proceeds in respect of, assets for which a depreciation allowance has been claimed,

  • (a) the undeducted balance of depreciable assets must be reduced by the lesser of

    • (i) the proceeds of disposition or insurance proceeds, as the case may be, and

    • (ii) the original cost of the asset; and

  • (b) when the lesser of the amounts referred to in subparagraphs (a)(i) and (ii) exceeds the undeducted balance of depreciable assets in the fiscal year in which the assets were disposed of, the excess must be included in the value of the output of the mine for that fiscal year.

• Marginal note:Depreciation allowance — proceeds of disposition

  (6) For the purposes of subsection (5), when the operator of a mine sells to a related person an asset for which a depreciation allowance has been claimed or removes the asset from the mine, the proceeds of disposition of the asset are the amount that could be expected to be realized from the sale of the asset to a person not related to the operator.

• Marginal note:Depreciation allowance — purchase cost

  (7) When the operator of a mine purchases from a related person an asset that is eligible for a depreciation allowance or transfers to the mine an asset from another mine owned by the operator, the cost of the asset for the purposes of calculating a depreciation allowance is the amount that the operator could be expected to pay to purchase that asset from a person not related to the operator.

• Marginal note:Rules respecting processing minerals not produced at the mine

  (8) When, in a particular fiscal year, a mine’s operator uses the mine’s depreciable assets, or any facilities located outside the Northwest Territories that are used for the processing of minerals or processed minerals produced from the mine, to process minerals or processed minerals other than those produced from the mine,

  • (a) the revenue earned from the sale or processing of those minerals or processed minerals must not be included in the value of the output of the mine;

  • (b) the deduction for the costs incurred during the fiscal year under paragraphs (1)(a) to (f) must be reduced by any costs incurred for the processing of minerals or processed minerals not produced from the mine;

  • (c) the original cost of the processing assets used to calculate the processing allowance amount under subparagraph (1)(k)(i) must be reduced by an amount equal to the original cost of the processing assets multiplied by the ratio of the costs incurred during the fiscal year under paragraphs (1)(a) to (f) for the processing of minerals or processed minerals not produced from the mine to the total costs incurred during the fiscal year, under those paragraphs, for the processing of all minerals or processed minerals at the mine; and

  • (d) the undeducted balance of the original cost of the mine’s depreciable assets at the end of the fiscal year must be adjusted to exclude an amount equal to the original cost of the depreciable assets used to process minerals or processed minerals not produced from the mine multiplied by the ratio of the costs incurred under paragraphs (1)(a) to (f) during that fiscal year and all prior fiscal years for the processing through those assets of minerals or processed minerals not produced from the mine to the total costs incurred under those paragraphs during that fiscal year and all prior fiscal years for the processing through those assets of all minerals and processed minerals at the mine.

• Marginal note:Rules respecting adjustment of calculations

  (9) When a mine produces minerals or processed minerals from lands to which these Regulations apply and any other lands,

  • (a) the deduction for the costs incurred during the fiscal year under paragraphs (1)(a) to (f) must be reduced by any costs incurred for the production of minerals or processed minerals from lands other than lands to which these Regulations apply;

  • (b) the original cost of the processing assets used to calculate the processing allowance under subparagraph (1)(k)(i) must be reduced by an amount equal to the original cost of the processing assets multiplied by the ratio of the costs incurred during the fiscal year under paragraphs (1)(a) to (f) for the processing of minerals or processed minerals produced from lands other than lands to which these Regulations apply to the total costs incurred during the fiscal year, under those paragraphs, for the processing of all minerals or processed minerals at the mine;

  • (c) the undeducted balance of costs eligible for the mine’s development allowance at the end of the fiscal year must be adjusted to exclude an amount equal to the costs referred to in subparagraph (1)(i)(ii) multiplied by the ratio of the costs incurred under paragraphs (1)(a) to (f) during that fiscal year and all prior fiscal years for the production of minerals or processed minerals from lands other than lands to which these Regulations apply to the total costs incurred under those paragraphs during that fiscal year and all prior fiscal years for the production of all minerals or processed minerals at the mine;

  • (d) the undeducted balance of costs eligible for the mine’s development allowance at the end of the fiscal year must be adjusted to exclude an amount equal to the costs of the workings referred to in subparagraph (1)(i)(iv) used in the production of minerals or processed minerals from lands other than lands to which these Regulations apply multiplied by the ratio of the costs incurred under paragraphs (1)(c) to (f) during that fiscal year and all prior fiscal years for the use of those workings in the production of minerals or processed minerals from lands other than lands to which these Regulations apply to the total costs incurred under those paragraphs during that fiscal year and all prior fiscal years for the use of those workings in the production of all minerals or processed minerals at the mine; and

  • (e) the undeducted balance of the original cost of the mine’s depreciable assets at the end of the fiscal year must be adjusted to exclude an amount equal to the original cost of the depreciable assets used in the production or processing of minerals or processed minerals produced from lands other than lands to which these Regulations apply multiplied by the ratio of the costs incurred under paragraphs (1)(a) to (f) during that fiscal year and all prior fiscal years for the use of those assets for the production or processing of minerals or processed minerals produced from lands other than lands to which these Regulations apply to the total costs incurred under those paragraphs during that fiscal year and all prior fiscal years for the use of those assets for the production or processing of all minerals or processed minerals produced at the mine.

• Marginal note:Timing and other requirements respecting adjustments

  (10) The adjustments referred to in paragraphs (8)(d) and (9)(c) to (e) must each be calculated at the end of each fiscal year of the mine with the difference between the amount calculated for that fiscal year and the amount calculated for the previous fiscal year being added to or subtracted from the undeducted balance of the depreciable assets or the undeducted balance of the costs eligible for the development allowance, as the case may be.

• Marginal note:Limitations on deductions and allowances

  (11) Despite any other subsection of this section, no deduction or allowance can be made in respect of a mine in relation to

  • (a) the capital cost of the depreciable assets, other than those subject to the depreciation allowance under paragraph (1)(h);

  • (b) depletion in the value of the mine or mining property by reason of exhaustion of the minerals;

  • (c) if an owner or the operator of the mine is a corporation,

    • (i) remuneration and travel costs of directors,

    • (ii) stock transfer agents’ fees,

    • (iii) shareholders’ meetings or the preparation of shareholders’ reports, and

    • (iv) legal, accounting and other costs incurred in connection with incorporations, reorganizations, financing or security or stock issues;

  • (d) interest on any debt, including an overdraft, loan, mortgage, advance, debenture or bond, that is capitalized or expensed for accounting purposes;

  • (e) remuneration of executive officers, administrative and consulting costs and costs in respect of offices not located at the mine site, unless that remuneration or those costs are directly related to operations of the mine or to the marketing and selling of minerals or processed minerals produced from the mine;

  • (f) the taxes on profits, property or capital, or payments in lieu of those taxes, paid to any level of government and the cost of preparing returns in respect of those taxes, except for customs duties, sales and excise taxes not otherwise refundable to the operator, for any taxes related to the employment of employees, and for the cost of preparing a return in respect of those taxes;

  • (g) the royalties paid for the use of mining property, the royalties calculated on revenue, production or profits of the mine, and the cost of calculating any royalties other than the royalties paid or payable under these Regulations;

  • (h) payments made to an organization, community or corporation, including an Aboriginal organization, community or corporation, that are not attributable to the provision of goods and services directly related to the development and operation of the mine or to prospecting and exploration on lands to which these Regulations apply;

  • (i) payments made for the use or lease of, or access to, the surface of the land on which the mine is located;

  • (j) discounts on bonds, debentures, shares or sales of receivables;

  • (k) increases in reserves or provisions for contingencies, other than in respect of a mining reclamation trust;

  • (l) dues and memberships for persons, other than employees, involved in the operation of the mine;

  • (m) insurance premiums other than those paid for minerals or processed minerals produced from the mine;

  • (n) costs incurred during the fiscal year to produce revenue that does not form part of the value of the output of the mine;

  • (o) subject to subparagraph (1)(i)(v), the purchase price of a recorded claim, a lease of a recorded claim or a mine;

  • (p) the purchase price of any financial instrument;

  • (q) charitable donations;

  • (r) advertising costs not directly identified with the output of a particular mine;

  • (s) any cost not evidenced in accordance with generally accepted auditing standards;

  • (t) the cost of inventories of fuel, other consumables and spare parts that have not been consumed in the operation of the mine;

  • (u) the costs of staking or recording a claim, or the cost of surveying the claim for the purpose of taking it to lease;

  • (v) rent paid for the lease of a recorded claim under these Regulations;

  • (w) the cost of preparing any financial information not required for the calculation of mining royalties;

  • (x) any cost incurred after any precious stones have been last valued by the mining royalty valuer, if those stones were sold or transferred to a related party, or to any other person if proof of the disposition is not provided, or if the stones were cut and polished before their sale or transfer;

  • (y) any costs related to public, community or government relations unless those costs were incurred for environmental assessments or other regulatory processes; and

  • (z) any fines, penalties or bribes.