Mining Tax Variations In North America

Ore distribution being what it is, many of today's mining companies are forced to develop foreign reserves to satisfy the demands of their customers. This necessity complicates the economic picture for a company, because management must look well be- yond grade and tonnage to determine the feasibility of developing a foreign orebody. Above all, the taxes on such a development must be assessed. The difference that taxes can make in mining profits will be illustrated here for three countries-Canada, Mexico and the United States. For purposes of comparison, identical orebodies will be assumed to occur in all three countries. Only the taxes on these properties will vary. Grade, tonnage, gross income, production costs and production rates will all be the same. The discussion will be limited to federal taxes, because state and provincial taxes are usually negligible by comparison. Assumptions relative to the orebody and the nature of the company undertaking the operation are as follows: (1) Copper is the only value to be recovered. (2) Sixty million tons of ore have been delineated. (3) Underground mining is required, and the production rate will be 3 million tpy. (4) The life of the property is 20 yr. (5) Operations in Mexico or Canada will be handled by a subsidiary of a U.S. parent company. (6) The subsidiary will offer stock.