Mineral and petroleum resources royalties bill
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Mineral and Petroleum Resources Royalties Bill. 13 May 2008. Contents. Background Comments: 2.1.1 Tax base, deductible expenses, integrated companies 2.1.2 Royalty / tax rate 2.1.3 Community royalties 2.1.4 State lease payments / State share of profits

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Mineral and Petroleum Resources Royalties Bill

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Mineral and petroleum resources royalties bill

Mineral and Petroleum Resources Royalties Bill

13 May 2008


Contents

Contents

  • Background

  • Comments:

    2.1.1 Tax base, deductible expenses, integrated companies

    2.1.2 Royalty / tax rate

    2.1.3 Community royalties

    2.1.4 State lease payments / State share of profits

    2.1.5 Earmarking of revenue

    2.1.6 Bad debts

    2.1.7 Relief for small miners

    2.1.8 Relief for marginal mines

    2.1.9 Gold mining

    2.1.10 Petroleum sector

    2.1.11 Coal bed methane (CBM)

    2.1.12 Fiscal stability

    2.1.13 Mining dumps and tailings

    2.1.14 Effective date of implementation

    2.1.15 Deductibility of mineral royalties for Income Tax purposes

    2.1.16 VAT on mineral royalties payable to the State

    2.1.17 Clay to manufacture bricks

    2.1.18 Ring fencing per mine

    2.1.19 Administration


Background

Background

  • Mineral and Petroleum Resources Royalty Bill (MPRRB) follows on the Mineral and Petroleum Resources Development Act (MPRDA), (Act 28 of 2002)

  • 1st draft Mineral and Petroleum Royalty Bill released for public comment on 20 March 2003

  • 2nd draft of Royalty and Petroleum Resources Royalty Bill released for public comment on 11 October 2006

  • May / June 2007 - Consultation, Workshop

  • 3rd draft of Royalty and Petroleum Resources Royalty Bill released for public comment on 6 December 2007

  • Briefing by National Treasury to PCOF, 4 March 2008

  • PCOF public hearings 11 & 19 March 2008

  • 23 April 2008 – Consultation, Workshop


Comments by

Anglo American South Africa Limited

Assmang Limited

Bapo Ba Mogale Community

BHP Billiton – Manganese & Coal

BHP Billiton Petroleum

Chamber of Mines (COM)

Chamber of Mines – Thomas Walde

Cosatu

De Beers

Gold Producer’s Committee – COM

Stephen Meintjies

OPASA (Offshore Petroleum Association of South Africa)

OPASA – Fiscal stability, Ernst Young

PASA (Petroleum Agency of South Africa)

Routledge Modise

16. M. van Blerck – Standard Bank (PCOF – oral)

17. SAMDA (South African Mining Development Association)

18. Implats

19. Ingonyama Trust

20. LRC (Legal Resource Centre)

21. Xstrata

22. Trans Hex Group Limited

23. Zululand Anthracite Colliery

Michael Schroder – OM Value Equity Assocoaition Ltd.

Clay Brick Association Ltd

ArcelorMittal

Aquarius

Revenue Watch Institute

PetroSA

SARS

Comments by:


Tax base

Tax base

  • Gross Sales Value =

    • Market value of a transferred mineral resource at its readily saleable condition (i.e., refined or unrefined (“concentrate”) state of mineral as specified)

    • Disregard transportation costs of “final product” (including insurance and handling charges)


Tax base market value gross sales

Tax Base: Market Value / Gross Sales

  • Refined; &

    • Gold

    • PGM - refined

    • Oil & Gas

  • Unrefined;

    • Diamonds

    • PGM – concentrate

    • Iron ore

    • Coal

    • Manganese

    • Chrome

    • Base metal

    • Mineral Sands

    • Sliver concentrate

    • Uranium

    • Aggregates

    • Other


  • Tax rates formula x ebit gross sales 100

    Tax rates – formula (X = EBIT/Gross Sales *100)

    • Y (r) = 0.5 + X/12.5 (Max = 5.0)

      Refined metal (refined Gold, refined PGM), and Oil and Gas

      2. Y (c) = 0.5 + X/9.0 (Max = 7.0)

      Unrefined; Concentrate

      Coal, Rough Diamonds, Iron Ore, etc.


    Mineral and petroleum resources royalties bill

    EBIT

    • EBIT = Taxable income (as defined in the Income Tax Act), excluding—

      • Financial instrument (except the hedging minerals) income and expense (e.g. interest expense)

      • Assessed losses

      • Capital gains & losses

      • Mineral royalties

      • If EBIT < zero, assumed to be zero.

      • Note allow for 100% capital expensing – same as for income tax purposes


    Y 0 5 x 12 5 refined y 0 5 x 9 unrefined

    Y = 0.5 + X/12.5 (Refined)Y = 0.5 + X=/9 (Unrefined)


    Ebit accounting depreciation

    EBIT (accounting depreciation?)


    Mineral and petroleum resources royalties bill

    1.2. 3. 4. 5.

    ExplorationMining Mineral Refining Value

    Processing Addition

    ___________ _______ ______ _____

    GeophysicsDrilling Crushing Smelter Rolling &

    DrillingCutting Hydro-Met. Plant Furnaces moulding

    SurveyHauling Material Handling Electro-winning Machining

    Furnaces cells, Caster Assembling

    ………….….…..……………… ………………….. ……………… ……………..

    GISMine Planning Comminution Reductants Design

    AnalyticalConsumables Grinding, media Chemicals Marketing

    Data ProcessingSub-contracting Chem / reagents Assaving Distribution


    Mineral and petroleum resources royalties bill

    THE FOUR STAGE BENEFICIATION PROCESS (Chamber of Mines)

    Mining

    Manu-facturing


    Mineral and petroleum resources royalties bill

    1.2.3. 4.

    MiningMining / Refining Manufacturing

    processing

    _______________________ _________

    The action of The action of cover-The action of converting The action of

    mining & producing ting a concentratethe intermediate goods manufacturing a final

    an ore or concentrateinto a bulk tonnageinto a refined product product for sale

    (primary product)intermediate productsuitable for purchase

    (such as a metalby both small & sophis-

    or alloyticated industries (semis)

    ……………………………………………..………………………….. ………………………………

    Run-of-mine oresMattes/slags/bulkSteel/alloys Worked shapes & forms

    washed & sizedchemicalsWorked shapes & forms

    concentrates Ferro alloys/

    pure metals


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