Compromise may be coming over U.S. mining royalty plan

Reform of mining legislation in the U.S. reached a new stage recently when the House of Representatives voted in favor of imposing an 8% net smelter return (NSR) royalty on hardrock mining companies operating on public land.

The legislation sponsored by Representative Nick Rahall passed by a 316-108 vote. In addition to the royalty, the legislation would allow the Secretary of the Interior to determine the suitability of certain federal lands for mining.

In May of this year, the U.S. Senate voted on mining law changes which would introduce a 2% royalty.

The two versions of the legislation now go to a Senate-House conference to resolve the differences.

American Mining Congress (AMC) President John Knebel expressed disappointment but not surprise at the House vote. “The measure, which has been coming for two or three years, represents the ultimate desire of environmentalists to deny access to the public lands,” he said.

The AMC, which supports the Senate version, said some 40,000 jobs would be lost if the Rahall Bill becomes law.

Current legislation governing the U.S. mining industry was passed in 1872. It permits miners to patent claims and buy the land for as little as US$2.50 per acre. There is currently no charge on metals mined from public land. The Rahall Bill would end those practices and set strict environmental practices concerning the restoration of worked-out mine sites. The environmental provisions of the Senate bill are more lenient. Earlier this year, the Clinton administration backed away from a proposed royalty ranging from 5% to 12.5% on gross mining revenue which was to have been included in the president’s 1994 budget plan.

“It’s better than 12.5%,” said Vince Borg, a spokesman for American Barrick Resources (TSE), about the proposed 8% royalty. Barrick, based in Toronto, is a major gold producer in Nevada, where one of its properties, the Goldstrike mine, contains an estimated 30 million oz.

Barrick has a land patent application before the government and is awaiting a court date for a hearing.

Another Canadian gold producer in Nevada, Rayrock Yellowknife Resources (TSE), currently pays a net proceeds tax to the state, and the company, according to executive vice-president David Hutton, was hoping the federal government would favor that type of payment instead of a NSR royalty. Hutton said Rayrock anticipates a 2-4% royalty compromise will be reached by the two legislative bodies.