Royalty arrangements in jeopardy

CIM Bulletin, Vol. 78, No. 882, 1985

ROBERT B. PARSONS, C.A., Partner Price Waterhouse, Toronto

Draft income tax amendments aimed primarily at certain carve-out arrangements prevalent in the oil and gas industry could have devastating results for long standing royalty arrangements in the mining industry. Whether or not this potentially damaging effect is intended is largely beside the point—the point is that the mining industry would be we/I advised to become familiar with the draft amendments and make sure that the potential damage to existing and future royalty agreements is minimized. The draft amendments fail to take into account the nature of mineral royalties and appear to reflect a lack of understanding of the characteristics of the mining industry.