Mining is an important industry in the country. In order to ensure the country's social and economic development and the reasonable development and utilization of mineral resources, the country must formulate corresponding policies to promote the development of the mining industry. Because mining involves the operation of different government departments and the coordination of the central government and local governments, many countries with mining as an important pillar industry need to formulate a unified national mining policy. The Canadian government defines a unified national mining policy as: "The sum of decisions and actions that affect the mining system, and the way it affects society and the economy." Mining policy can be based on changes in the world mining market and different historical stages of national social development. Make adjustments as required. The national mining policy promulgated by the Canadian federal government in 1996 is the "Government of Canada Minerals and Metals Policy: Cooperation for Sustainability". Mining laws are rigid and difficult to adapt to the rapidly changing mining market, while national mining policies are flexible and can be adjusted with changing situations. Mining activities involve various aspects of national mining policy interests, and many goals are in conflict. It is necessary to adjust the interests of various aspects through national mining policies and achieve the goal of promoting mining development through the joint use of planning, taxation, finance, fiscal and other means. It needs to be emphasized that national mining policies cannot be contrary to the Mining Law and other relevant laws. my country's mineral exploration encounters many complex problems. When promulgating relevant policies, we must emphasize governance according to law.
As mentioned in the first chapter of this book, in market economy countries, mining is generally divided into six stages. Mineral exploration is the starting point of mining activities and the most important component of mining. This book only studies commercial mineral exploration, so it only discusses issues related to the national unified mining policy involving commercial mineral exploration. The other five stages only mention a few relevant issues and do not discuss them systematically.
1. Tax deduction for mineral exploration investment
Mineral exploration is characterized by high risk and high investment. During the mineral exploration stage, there is no cash income, and for the enterprise, the cash flow is negative. Because mineral exploration is an integral part of mining, the success rate of mineral exploration is only 1% to 2% on a project basis. Theoretically, investment in failed exploration projects should be compensated during mine production. How to regulate taxation policies and encourage commercial mineral exploration is an important part of the country's unified mining policy. That is, in the design of the tax system, the characteristics of the mineral exploration industry must be fully considered.
The core is to deduct exploration expenses from income. Mineral exploration is to mining what research and development is to manufacturing, and is vital to increasing the industry's tax base. Investment in mineral exploration should not come from the profits of mining companies, but should be a component of costs. In addition to geological surveying, geochemical and geophysical surveying, trench exploration, drilling, pit exploration, testing, and geological report preparation, soft inputs such as preliminary data collection, field reconnaissance, consultation and demonstration, negotiation and signing of exploration projects are also exploration expenditures. All expenditures related to mineral exploration constitute cumulative mineral exploration expenditures. Taxpayers can use accumulated mineral exploration expenditures to deduct their income. If the deduction is not completed in the current period, it can be carried forward indefinitely for deduction. In order to encourage mineral exploration, some countries even implement a tax system with double deductions.
2. Financial subsidies for mineral exploration
Implementing government financial subsidies for commercial mineral exploration is also a regulatory method often used by the government under market economy conditions, just like in Europe ***Some countries in the same body implement agricultural financial subsidies.
1. Characteristics of government financial subsidies for commercial mineral exploration
In a specific period, when a certain mineral resource is lacking and cannot be completely solved by market means, the government will provide Financial subsidies for commercial mineral exploration. For example, during the Cold War, the United States provided government financial subsidies for the exploration and development of tungsten ore and other strategic materials that the United States lacked. By adjusting the types of minerals subsidized, the proportion of subsidies, and the methods of subsidies, the government's purpose of intervening and regulating commercial mineral exploration can be achieved. The proportion of subsidies is generally not high, but it must have the effect of "making a big difference" in stimulating investment in commercial mineral exploration.
In the 20th century, the U.S. government provided financial subsidies for mineral exploration by issuing 25% to 50% exploration subsidy loans for 36 types of minerals that the United States lacked. If the exploration and development is successful, the government-subsidized loan will be repaid at a fixed amount from the income every year. If the exploration fails, the government-subsidized loan will be exempted. Japan once provided three-stage exploration subsidies for domestic mineral exploration. As the level of exploration work increases, exploration risks decrease, and the proportion of government financial subsidies for mineral exploration also gradually decreases.
2. Government financial subsidies for overseas mineral exploration
Some industrialized countries that lack mineral resources, such as Japan, South Korea, France, etc., provide certain subsidies for their companies to carry out mineral exploration overseas. financial subsidies. Some countries also use government foreign aid budgets to allow domestic companies to carry out mineral exploration overseas, aiming to improve the competitiveness of domestic companies in the global mining industry and the proportion of mineral resource rights they hold.
The Korea Mining Corporation is a state-owned enterprise in South Korea. Its mission is to promote the exploration and development of overseas mineral resources, and ultimately achieve the goal of promoting South Korea's economic development. The South Korean government provides financial subsidies of 50 billion won (approximately US$40 million) to the Korea Mining Corporation every year for overseas mineral exploration and development projects and preliminary risk exploration.
The Korea Mining Promotion Corporation cooperates with the General Administration of Nonferrous Geological Exploration and the Shaanxi Provincial Geological and Mineral Exploration and Development Bureau in China to carry out nonferrous metal and coal exploration. If the exploration progresses and the pre-feasibility study shows that development is possible, the Korea Mining Corporation will introduce the project to domestic companies, and with approval from the Resource Policy Bureau of the Ministry of Commerce, Industry and Energy, it will develop it using loans from the Overseas Mineral Development Fund. The Korea Mining Promotion Corporation holds a certain proportion of equity in the project. It has achieved success in the exploration and development of projects such as Togara North, Wyang and Springvale coal mines in Australia, Knife Lake copper mine in Canada, and Diadipio copper mine in the Philippines.
3. Government financial subsidies for prospectors
Prospectors are still one of the main players in the mineral exploration market in countries such as Canada and Australia, as well as in Latin America and southern Africa. one. The prospectors’ prospecting concepts, field experience, applicable technologies, and highly flexible field operations adapt to the characteristics of the grassroots exploration stage, allowing them to still occupy a place in the commercial mineral exploration market. However, prospectors are short of funds and have weak risk tolerance. Some governments provide financial subsidies to prospectors for their exploration activities. For example, the Prospector Assistance Program (PAP) in Newfoundland, Canada, has also provided financial subsidies to junior exploration companies with no cash income in the past. For prospectors who have obtained exploration rights, the subsidy is CAD 5,000. For exploration projects that carry out drilling, the subsidy amount can reach 50% of the tangible expenditure cost, with a maximum subsidy amount of CAD 80,000 per project. Sometimes, financial subsidies are also available for metallurgical experiments.
4. Government financial subsidies for commercial mineral exploration in my country
Among the fields of economic activities in my country, mineral exploration is one of the last industries to withdraw from the planned economy. The mineral exploration industry lags behind in reform and opening up, and the commercial mineral exploration market is not standardized and underdeveloped. At present, our country is in the middle stage of industrialization, and the consumption of mineral resources is growing rapidly. The gap between supply and demand of some important minerals continues to expand, and the degree of guarantee of mineral resources has declined. In view of the above national conditions, in order to alleviate the bottleneck constraints of mineral resources, and under the long-term appeal and request of interest groups in the mineral exploration industry, one of the several important measures taken by the government is to provide various forms of government financial subsidies for commercial mineral exploration.
At present, in order to support commercial mineral exploration, my country provides many types of special projects with financial subsidies, mainly including: National Geological Exploration Fund Project, Local Geological Exploration Fund Project, Central Mineral Resources Compensation Fee Mineral Exploration projects, local mineral resource compensation fee mineral exploration projects, the Ministry of Finance’s domestic mineral resources risk exploration projects, the Ministry of Finance’s foreign mineral resources risk exploration projects, crisis mine prospecting projects, key prospecting projects, etc. Some special funds with financial subsidies are being consolidated. As of 2006, the expenses of these special projects accounted for about 1/3 of the investment in mineral exploration. The author believes that the government's financial subsidies for commercial mineral exploration are a transitional measure in the process of my country's mineral exploration going to the market. How to make good use of this taxpayer's money will have an impact on the future development of my country's mineral exploration. , yet to be tested by practice and time.
3. Mineral exploration land system
Should ensure that as much land as possible is available for mineral exploration. It is necessary to realize that mineral exploration is only a temporary, existential and land-use activity that does not disturb the land much. Develop clear access policies for mineral exploration land. Land where the establishment of exploration rights is prohibited or restricted must be clearly defined to facilitate inquiry. Establish easy-to-operate access procedures for mineral exploration land, fair and reasonable compensation calculation methods for mineral exploration land, and coordination mechanisms with land use rights holders.
4. Encourage stock market financing
Canada is the largest country in the world in financing risky mineral exploration for junior exploration companies. In terms of tax policy, a policy is implemented to encourage stock market financing—the Flow-through Share system. The all-passed stock system means that individual investors who invest in mineral exploration, that is, individuals who purchase all-passed stocks of listed primary exploration companies, can deduct the full amount of mineral exploration investment from their personal income, and no longer pay personal income tax on the deducted portion. To further encourage exploration, after 1983, individuals who purchased stocks could apply for a 133.3% deduction, which was an excess deduction. The essence of the pass-through stock system is that listed junior exploration companies agree to give up the right to tax deductions for part of their exploration expenses, which becomes an expense for the taxpayer who purchases the pass-through stock. All are encouraged through the stock system to purchase stocks of listed junior exploration companies and invest dispersed personal funds in high-risk mineral exploration. The government supports commercial mineral exploration through adjustments to the tax system.
5. Resource Depletion Allowance
The meaning of the resource depletion allowance (Depletion Allowance) system is that mining enterprises can set aside a portion of their net profits in each tax year to use Exploration around and deep into the mine supports the mine’s continued production. There are two types of subsidy methods for resource depletion subsidies. One is cost subsidy, that is, a subsidy amount is determined for each ton of ore mined, and the subsidy is based on the quantity of ore produced. The other is a fixed-ratio subsidy, which is a resource depletion subsidy based on a fixed proportion of the mine’s net profit. The resource depletion subsidy system is essentially a preferential tax policy that reduces the income tax of mining companies.
It is somewhat similar in form to the crisis mine prospecting project in my country. The difference is that the funds for the crisis mine prospecting project are collected and disbursed through resource compensation fees, while the resource depletion subsidy is raised by the mine for its own use. Mining countries such as Canada, Australia, the United States, Indonesia, Malaysia, and Zimbabwe all implement resource depletion subsidy systems.