Some Implications of the New Assistance Formula for South African Gold Mines

Written contribution E. Wroth* (Visitor): The technical aspects of the assistance scheme which IS provided for in the Gold Mines Assistance Act, 1968, and certain consequential amendments to the Income Tax Act, 1962, are explained by Dr Krige. The object of this contribution is to explain the working of the Gold Mines Assistance Act (hereafter referred to as the 'Assistance Act') for the benefit of those concerned with the tax and assistance assessments of gold mining companies. The views expressed do not necessarily reflect the Revenue Department's interpretation of the legal provisions involved. 1. MINES WHICH QUALIFY FOR ASSISTANCE 1.1 The assistance scheme is applied on a selective basis. Mines which qualify for assistance are defined in the Assistance Act as 'assisted gold mines'. The requirements for classification as an assisted gold mine are that: (i) the mine be a producing gold mine; (ii) it would be likely to close down within eight years if not assisted; and (iii) with State assistance its life would be appreciably prolonged and there would be a significant increase in production of gold or uranium, or of both gold and uranium. 1.2 A mine is only considered for classification as an assisted gold mine on application. Such applications must be made to the Mining Leases Board through the Government Mining Engineer. Classification of a mine as an assisted gold mine is at the discretion of the Minister of Mines who acts in consultation with the Minister of Finance and has regard to the recommendations of the Mining Leases Board. 1.3 The Minister of Mines will impose conditions subject to which a mine is to be classified as an assisted gold mine. The most important will be that the mine must immediately lower its operating pay limit, as normally calculated, by a percentage fixed by the Mining Leases Board and conduct its future mining operations in accordance with the average grade of its ore reserves determined on the basis of such lower pay limit. l.4 The Minister will fix the date as from which classification as an assisted gold mine is to be effective. So long as the mine has operated on the basis of the lowered pay limit for at least three months during the particular year of assessment, he would normally fix the effective date as the first day of the year of assessment.