North

Rio Tinto says it paid $38M in royalties to N.W.T., but gov't can't confirm

The mining company is disputing a government-commissioned report that claims it paid no royalties in 2015, but the government declined to confirm that, citing confidentiality.

Rio Tinto is disputing a claim in a recent mining report that it paid no royalties in the N.W.T.

A recent report commissioned by the government of the Northwest Territories seems to confirm the rhetorical question posed here in a 2016 government marketing brochure. (GNWT)

If the government of the Northwest Territories wanted to attract attention to its mining policy review in advance of the territory's new Mineral Resources Act, it did a good job.

A report, posted to a territorial government website in October, paints the disturbing picture of a royalty and taxation regime that lets mining companies get away with paying little in mining royalties and taxes, at least compared to some other jurisdictions in the world.

Rio Tinto, a 60 per cent owner of the Diavik diamond mine was singled out in the report for not according to the report — paying any royalties for diamond production at the mine in 2015. The company has since disputed that claim.

"Rio Tinto paid just over $38 million in royalties to the Government of the Northwest Territories in 2015 from the Diavik Diamond Mine," a company spokesperson stated in an email to the CBC.

The confusion, the spokesperson said, may have resulted from how Rio Tinto reports royalties as part of taxation instead of as a separate line item, all in accordance with standard international accounting practices.

Gov't mum on specific royalties

Pamela Strand, assistant deputy minister for minerals and petroleum resources, said the government of the Northwest Territories cannot help clear up the matter of how much in royalties were paid on behalf of the Diavik diamond mine.

Strand said the government is prevented from saying how much it may have received in royalties from Rio Tinto, or any mining company in the N.W.T. for that matter.

"We operate under the provisions of the mining regulations that keeps that information confidential," Strand said. "We report as a government about royalties as a whole."

According to information provided by the Department of Industry, Tourism and Investment, in the 2014/15 fiscal year, the territory received $62.83 million in revenue from all mining and oil and gas activities. In the 2015/16 fiscal year, the government received $55.76 million in royalties.

In any case, specific royalty revenues do not appear to be the main reason the government commissioned the report. 

"Our focus is the larger picture of what this report was intended to be — sparking the large seams for discussion that are presented in the paper and our discussion paper."

The report and discussion paper can be found here.

"I don't think there's any reason to be alarmed by the research," Strand said. "It's informing and we're engaging. Collecting perspectives is very important."

The N.W.T. is 'open for business'

The critical perspective presented by the report does, on the face of it, seem to confirm the truth of marketing efforts produced by the territorial government to promote the N.W.T. as "the friendliest place for mining."

In a 2016 document produced by the government "Unlocking our Potential: the Northwest Territories is open for business," the territory is promoted as an industry-friendly place to invest.

The report confirms that the territory is friendly to the mining industry: friendly to the point of having what the report described as one of the most "charitable" royalty regimes in the world.

At the heart of the matter is whether or not the government is getting a fair share of royalties from the wealth mining companies produce in the N.W.T.

Frame Lake MLA Kevin O'Reilly is concerned the Department of Industry, Tourism and Investment has the wrong focus. 

Frame Lake MLA Kevin O'Reilly says the territory is too focused on marketing the N.W.T. to mining companies, at the expense of regulating the industry. (Alex Brockman/CBC)

"We have a department that really is a promoter of mining rather than a regulator," O'Reilly said. "We've had jurisdiction now over it for almost four years as of April 1 next year [since territorial devolution], and we've done nothing."

Strand said the territorial government is taking the report under consideration and it will be one source among many to inform the territory's new Mineral Resources Act, meant to replace existing regulations within the next two or three years.

"We're looking to collect as many different perspectives as possible," Strand said. "The report is one resource. At this point we haven't made any policy assumptions yet."

With files from Brandon Maher

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