RE: Royalties26 Feb 2024 14:51
Laverda
after reading several papers, studies and reports from IMF, Worldbank and other organizations publishing information about mining in Africa and the fiscal regime, I can only find that a "10% FCI" is never a royalty.
Not in laws, not in a Mining Code, not in accounting, not in Mining Rights, nowhere is it considered to be a royalty.
The possible dividend paid to a government or state controlled company to hold this free equity from a mining company sometimes is considered as a form of a tax on profit but they will never official call it a tax.
Definition of Royalty:
Royalties refer to payments made by mining license holders to the government for the privilege of extracting minerals from the area defined under the mining license. Sometimes royalties are referred to as “mineral tax”, “extraction tax” or “export tax”. However, they are not a tax in the strict sense of the term; their purpose is to compensate the owner of the mineral resource for the loss of a non-renewable asset regardless of the profitability of the project. Therefore it is critical to price royalties at the right level.
There are three main types of royalties:
Fixed-rate (ad-valorem) royalties charge a fixed percentage of the value of extracted resource, or the value less some allowable costs.
Variable-rate (ad-valorem) royalties charge a rate that varies according to some defined factor, usually the market price of the commodity. This rate is applied to the value of extracted resource, or the value less some allowable costs.
Per-unit royalties charge a fixed fee for each unit of production (for instance, five dollars per ton). This type of royalty is less common than ad-valorem royalties, except for low value commodities, such as gravel.
(more on the AMLA website)
More to read on this website: AFRICAN MINING LEGISLATION ATLAS Guiding template
https://www.a-mla.org/en/guidingtemplate
Part C FISCAL TERMS => Section 36.1 (State Equity Participation) and 36.2 (Royalties)
Also from the same organization:
TOOLKIT FOR STATE EQUITY PARTICIPATION IN MINING COMPANIES
https://www.a-mla.org/images/articles/80620%20Toolkit%20for%20state%20equity%20v22.pdf
Other studie (From IMF)
https://www.imf.org/external/pubs/ft/scr/2015/cr15348.pdf
More several studies to find and more websites with info about mining in Africa saying the more or less the same but never that the "10% FCI" is a royalty or a equal to a royalty.
But nothing wrong if you keep believing that it is a royalty, just show us where you find the info on a website where they declare this "10% FCI" as royalty, please publish the link to it so people can read it on that website.
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