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April 26, 2015

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Sun Editorial:

A deal with mining

Constitutional fight doesn’t address the need for revenue this cycle

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Senate Minority Leader Michael Roberson stunned the Legislature this month when he and several members of his caucus came out in support of Senate Joint Resolution 15, which would strip the mining industry’s tax protection from the state constitution.

Tim Crowley, president of the Nevada Mining Association, told the Sun’s Anjeanette Damon the move appeared to be punitive and an attempt to damage the industry. (See Crowley’s op-ed piece on the issue here.)

Roberson, R-Henderson, says the mining proposal is not punitive but is an alternative to an initiative that would create a business margins tax.

“We support the mining industry,” Roberson said. “We are glad they are here. We want them to be profitable and productive, but we also want to look at the mining industry and how they generate revenue for the state compared to how we generate revenue from the gaming industry.”

The concern about mining paying its fair share is long-standing and understandable. When Nevada came into statehood 149 years ago, mining interests prevailed in a debate over taxes and had a favorable tax provision written into the state constitution. In 1989, the provision was updated to cap the amount the state can tax mining operations.

The state also provides mining companies with healthy deductions, which have in the past been embellished by the Nevada Tax Commission. Then there’s the lax oversight — the state went a few years without an auditor trained to examine mining deductions, which can be complex. There also are mining’s record profits and relatively small tax bill. Taken together, the reason for the concerns are clear.

The mining industry and its supporters have complained that SJR15 will lead to an industry-specific tax, but that claim only seems to further the argument for the measure. If anything, the constitutional provision offers industry-specific tax protection; no other industry enjoys such an enviable position, including gaming, which generates far more tax revenue and paces the state’s economy.

Setting aside the issue of the fairness of the mining industry’s constitutional protection, there’s a practical issue facing the Legislature: The state needs more money to pay for its ailing schools and other services, and SJR15 wouldn’t solve that any time soon.

If SJR15 passes the Legislature this year, it will go to the voters in November 2014. If voters approve the measure, it will be up to the Legislature in 2015 to consider any tax policy changes, and any resulting tax revenue would come months after. The state needs the money now.

The mining industry has said it is willing to work with the Legislature to find a solution, and that’s welcome. We’d like to see a deal made this session rather than wait a few years.

Proponents of SJR15 argue that the mining industry pays higher tax rates in other states, so it would stand to reason that if mining companies can afford to pay more in other states, they can afford more here. Perhaps the mining industry could agree to pay something closer to what they’re required to in other states and start paying in this budget cycle, rather than in future years.

Such a deal — it’s what’s called compromise, and it fuels politics— could avoid the messy constitutional fight and guarantee the state a stable revenue stream for years to come. That would be a win for everyone.

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  1. Going through the process to change a 149 year old mining law that long favored mining, in a few more years, is relatively small time. Quit trying to by-pass the real reform, the real need.

    Nevada has long suffered and a few more years wait in order to set things right, is worth the wait!

    As I have stated, MINING has enjoyed "favored status" for over a century, since writing the MINING laws into the Nevada State Constitution. NONrenewable minerals have been extracted from Nevada and taken out of the state, even out of the country, for a pittance, where mining pays other states far more for what it takes. Nevada's infrastructure has long been suffering,with the mining barons living the high life out of state, and having their legions of lobbyists influence any and every person who deals with mining in any way, shape, or form.

    Commenter NVFisherman expressed his take on mining with, "A pretty bad PR piece. The fact remains that the royalties the mining industries pays are a joke. Look at what the royalties the mining companies pay to various regions of Australia. The mining companies which are largely owned by foreign interests can easily afford to pay more..a lot more."

    Many of those working in the mining industry are outsiders, and they are making the nice compensation figures. Where the mining stops, they pull up stakes and move back to their "real homes" in other states or countries. Sure, you have a few locals driving haulers, delivering fuel and goods at lower wages, then their jobs disappear when mining stops. Then what? It is a boom and bust industry, and it pays a pittance back to the State of Nevada and its People in return for the wealth it exploits.

    As the previous Governor Bob Miller long ago stated, "Mining does not pay its fair share," way back in 1989. It never has, anyway you cut it.

    So quit the lies and propaganda, mining. The People of Nevada have heard enough.

    Blessings and Peace,

  2. Tanker1975 stated,"The region has 59.0 million ounces of proven and probable gold reserves, representing 42% of the company's total reserves.

    In 2012, gold production is expected to be in the range of 3.425-3.55 million ounces at total cash costs of $475-$525 per ounce. Pueblo Viejo is expected to contribute about 80,000 ounces of gold to Barrick in 20123 and is anticipated to contribute an average of 625,000-675,000 ounces to Barrick annually over the first full five years of operation at total cash costs of $300-$350 per ounce.

    Beyond 2012, we have identified various opportunities to add production within North America, including the recent Goldrush discovery in Nevada.

    This is the link to the Barrick Mining document on mining in North America.

    Barrick paid about $104,000,000 to Nevada last year. They prepaid taxes for one year during the worst of the budget crunch.

    This may help you understand some of the recent history of taxes paid by mining to Nevada.

    Coincidentally, Barrick Gold of North America issued a news release Thursday announcing it had paid record state taxes on its Nevada operations, prepaying $101 million in net proceeds of minerals taxes to the state on March 1, based on estimated 2011 operating results.

    However, Nevada Department of Taxation projected figures published by the Las Vegas Review Journal reveal Barrick's Nevada operations are expected to earn gross revenue of $3.72 billion this year with allowable deductions of $1.73 billion, resulting in net proceeds of nearly $2 billion. Net tax after credits is projected to be $101.9 million this year.

    Nevada's second largest net proceeds of mines taxpayer, Newmont, is projected by Nevada taxation officials to pay $33.7 million in net proceeds taxes this year as Newmont's Nevada operations are expected to earn a gross revenue of $2.21 billion with allowable deductions of $1.59 billion, resulting in net proceeds of $620 million.

    In total, the Nevada Department of Taxation projected that mining companies would claim $4.2 billion in tax deductions in 2011 as many global mining companies proclaimed record earnings last year, thanks to record metals prices."

  3. Continued by Tanker1975, "The 2011 Barrick Mining annual report is out. If you read it, there are some very interesting facts that emerge. This is a link to the Barrick Annual Report for 2011.

    Barrick Mining either owns outright, or is a partner in a joint venture in 7 gold mines in Nevada. To determine my estimate a profits for 2011, I assumed the price of gold at $1500 per ounce, or less. The current price for gold is in excess of $1750 per ounce. The first four mines listed are totally owned by Barrick Mining. In 2011, according to their own figures, Barrick Mining produced almost 97 TONS of gold from their Nevada Mines. That is same weight as 16 full size, original HUMMERS. Barrick Mining has reported record profits and dividends in both 2010 and 2011.

    The Cortez Hills Mine produced 1.42 Million (44.375 tons) ounces of Gold at a cost of $245 per ounce. If you assume a conservative profit of $1000 per ounce, you get a profit for the Cortez Hill mine of $1,420,000,000. Barrick paid a total of $47,300,000 in local and state taxes last year.

    Bald Mountain Mine produced 93,000 ounces (2.9 tons) at a cost of $558 per ounce. Assuming a profit of $900 per ounce for the Bald Mountain Mine, you get a profit of $83,700,000.

    The Gold Strike mine produced 1.09 MILLION ounces (34.0625 Tons) at a cost of $511 per ounce. Again assuming a profit of $900 per ounce for the Gold Strike mine, you get a profit of $981,000,000.

    Ruby Hill mine produced 127,000 ounces (3.96875 tons) at a cost of $334 per ounce. Assuming a profit of $1000 per ounce for Ruby Hill, you get a profit of $127,000,000.

    Barrick Mining is involved in three joint ventures in Nevada.

    Barrick owns 33% of the Marigold mine. Barrick's share of production was 51,000 ounces (1.59675 Tons) at a cost of $761 per ounce. For the Marigold mine, assume a profit of $700 per ounce. The total profit would be $35,700,000.

    Barrick owns 50% of the Round Mountain mine. Barrick's share was 178,000 ounces (5.5625 Tons) at a cost of $612 per ounce. Assuming a profit of $800 per ounce for the Round Mountain mine, we get a total profit of $142,400,000.

    Barrick owns 75% of the Turquoise Ridge mine which produced 135,000 ounces (4.21875 Tons) at a cost of $569 per ounce. Finally for the Turquoise Ridge mine, assume a profit of $700 per ounce. This would give a profit of $ 94,500,000.

    Barrick is actively exploring in the Carlin Trace in Nevada. The Carlin Trace is one of the richest gold deposts in the world. Barrick's annual report shows that 44% of the companies income comes from North America. Don't forget that Barrick is also mining silver along with the gold in Nevada. If you add all of the projected and conservative profits, the total is $2,884,300,000. This is a conservative estimate."

  4. Readers may have noticed that I have "promoted" Commenter Tanker1975's well researched information. The People of Nevada should be outraged over the arrogance and contempt the MINING industry demonstrates in its paying the State and its People in Nevada, a mere pittance, for all it extracts from the state's soil and rock.

    Nevada has suffered a weakened and poorly funded infrastructure for years and years because of low revenues that are under the control of the State of Nevada Lawmakers during the Nevada State Legislative Session addressing the Nevada State Constitution. I am concise in referring to the Nevada Constitution because sadly, many adults in Nevada, have no clue that Nevada has a Constitution, and in order for changes to be made, it must be changed.

    Our Lawmakers should require the MINING industry to at the very least, pay the average of what the other 49 states pay to them in assessments. That would only be FAIR. But as we all know, MINING will kicking, scream, pay off politicians, every inch of the battle way.

    Tanker 1975 added an interesting read in Comments, "This is an interesting article. The Barrick mines in Nevada produced over $8,760,000,000 and paid $104,000,000 to the state of Nevada. The contract with the Domincian Republic has Barrick Mining paying 3.2% of the gross production, 25% income tax and 8.75% of net earnings or an estimated total of $11,000,000,000. What's wrong with that picture?

    Blessings and Peace,

  5. Pass SJR15 and let the voters decide! Mining has enjoyed special status for far too long.

  6. Article 10, Section 5 of the State Constitution places a hard cap on how much mining can be taxed. No other industry or interest in this State enjoys that protection.

    It makes no sense whatsoever to allow that protection to remain in place in exchange for asking the mining industry to not opposed changes in the deductions this year. That protection needs to go, period!

    What is not being said is that the proposed margins tax on everyone else also will not take effect until the 2015 session.

    No, this is not a deal with mining, this is a deal with the devil.