Tax Administration

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Mineral Resource Certification

The Income Tax Act (the Act) differentiates broadly between a "mineral resource" and an "industrial mineral mine." Subsection 248(1) of the Act defines a "mineral resource," and any mineral deposit that is not included in this definition is treated by the Act as an industrial mineral mine for income tax purposes.

The definition of mineral resource in subsection 248(1) is:

 'Mineral resource' means:

  1. a base or precious metal deposit,
  2. a coal deposit,
  3. a bituminous sands deposit, oil sands deposit, or oil shale deposit, or
  4. a mineral deposit in respect of which:
    1. the Minister of Natural Resources has certified that the principal mineral extracted is an industrial mineral contained in a non-bedded deposit;
    2. the principal mineral extracted is calcium chloride, diamond, gypsum, halite, kaolin, or sylvite; or
    3. the principal mineral extracted is silica that is extracted from sandstone or quartzite.

Process for Obtaining "Mineral Resource" Status

  1. Determine if the mineral deposit on which you plan to carry out exploration or mining activities fits in the definition of a "mineral resource"; if in doubt, contact Natural Resources Canada (NRCan) for advice and clarification:

    James Lauer, Senior Policy Manager
    Tax and Kimberley Process Program Division
    Lands and Minerals Sector
    Natural Resources Canada
    Tel.: 343-292-8730, Fax: 613-943-8025
    E-mail: James Lauer
  2. If the mineral deposit does not fit within the mineral deposits listed explicitly, then a certification is required. Assemble the following information:
    • A legal description of the property. A complete list of the names and identification numbers of the mineral claims, leases, land lots, etc., that identify the property.
    • The exact location of the deposit (claim numbers); otherwise, provide a precise map location by latitude and longitude, or other coordinates.
    • A detailed geological description of the deposit, with particular reference to the non-bedded nature or alteration of a bedded deposit.
    • Details on the principal mineral (or minerals) to be extracted.
    • The end use to which the mineral extracted will be put (e.g., specify if magnesium oxide from a magnesite deposit is to be used in the manufacture of refractory bricks for furnace linings, or for another purpose).
  3. Send it to:

    Canada Revenue Agency
    Income Tax Rulings Directorate
    Resources Industry Section
    Place de Ville, Tower B
    11th Floor
    112 Kent Street
    Ottawa, Ontario, Canada K1A 0L5

Separate Mine Status

The question of separate mine status (or new mine status) in connection with the Income Tax Act has been considered by the courts on several occasions. For the purposes of the Income Tax Act, jurisprudence concerning the subject of separate mine status has defined a mine as follows:

"A body of ore together with the workings, equipment and machinery capable of producing it."

From this definition, it follows that a new mine must have its own workings, machinery and equipment separate and distinct from any adjacent mining operation.

The following is a list of the relevant jurisprudence:

  1. North Bay Mica Company Ltd. v. M.N.R., D.T.C. 1151 (S.C.C.)
  2. Bermah Mines Limited v. M.N.R., 66 D.T.C. 519 (T.A.B.)
  3. M.N.R. v. MacLean Mining Company Limited, 70 D.T.C. 6199 (S.C.C.)
  4. Marbridge Mines Limited v. M.N.R., D.T.C. 5231 (Excheq. Ct.)
  5. Bethlehem Copper Corporation Ltd. v. M.N.R., 72 .C. 6410 (F.C.T.D.)
  6. M.N.R. v. Bethlehem Copper Corporation Ltd., 73 D.T.C. 5281 (F.C.A.)
  7. M.N.R. v. Bethlehem Copper Corporation Ltd., 74 D.T.C. 6520 (S.C.C.)
  8. Falconbridge Copper Ltd. v. The Queen, 75 D.T.C. 5394 (F.C.T.D.)
  9. Falconbridge Copper Ltd. v. The Queen, 79 D.T.C. 5227 (F.C.A.)
  10. Oro Del Norte, S.A. v. The Queen, 90 D.T.C. 6373 (F.C.T.D.)
  11. Placer Dome Inc. v. The Queen, 93 D.T.C. 235 (T.C.C.)

Production in Reasonable Commercial Quantities

  • The test developed by NRCan is that the date of commencement of production in reasonable commercial quantities is:
    • The first day of a period of 90 consecutive days during which the mill that serves the mine should have produced at 60% or above its design capacity.
  • This test, however, is a “rule of thumb” and must be applied with discretion if the mill is too small for the mine or if the mine does not have a dedicated mill.