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Comparative Review of the Canada Mining Regulation Royalty

Comparative Review of the Rate of Royalty in the Canada Mining Regulation, as it relates to National and International Competitiveness. Prepared by Two Ducks Resources – Analysis for the Mining Association of Canada and the Department of Indian Affairs and Northern Development, June 2008.

This study evaluates the financial competitiveness of mining royalty under the Canada Mining Regulation* (CMR) within the comparative context of the fiscal regimes applied to
mining elsewhere in Canada, and in selected other mineral producing countries and states that may be considered to be competing with Canada’s north for mineral investment.

The CMR royalty was substantially revised 10 years ago, with the expressed objective to modernize it and set the effective royalty rate to be mid-stream competitive amongst
regimes in competing jurisdictions within Canada and overseas. There have been substantial changes in the mining activity in the north in the intervening ten years, with the introduction and growth of large scale diamond mines and a retraction in the traditional gold and base metal mines.

Perceptions leading to this study were that the rate of CMR royalty was too high, to the point of being uncompetitive. In particular, the statutory royalty rate, at 13%, was reported to have detrimental impact on mature mines. In addition, the federal government has made agreement with aboriginal groups integral to permitting mines in the North – but the costs of such required impact and benefits agreements (IBAs) are not deductible. Finally, the CMR royalty was seen as being overly complex.

The analysis was initiated to review whether the CMR royalty has maintained the intended competitiveness since that last revision.

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