Mining & Mineral Economics

Mineral Taxation

Royalty as a share of value, profit after corporate tax, and net profit once both royalty and tax are deducted.

PART 1

Topic Breakdown & Traps

The Engineering Principle

Mineral projects pay the state through royalty (a charge on production, often a percentage of value or a rate per tonne) and corporate income tax on profit. Profit after tax is profit before tax times

(1 - tax rate)

. Net profit is what remains after royalty is deducted from revenue, operating costs are removed, and tax is applied to the resulting taxable profit.

The Core Formula Matrix

Royalty:

Royalty = rate \times value

.

Profit after tax:

P A T = P B T \times (1 - tax rate)

.

Taxable profit:

P B T = revenue - royalty - operating cost

The ‘IIT Traps’

⚠
Royalty is usually on revenue/value, deducted before tax — not on profit.
⚠
**Apply $(1 - tax rate)$ **, not the tax rate, to get the amount kept.
⚠
Deduct royalty and costs first, then tax the remainder.

PART 2

Progressive 3-Tier Question Suite

Q1BASIC1 Mark · MCQ

Production value is

\

10\ \text{M}

an d t h er oy a l t y r a t e i s

5\%$. The royalty payable is:

Q2MEDIUM2 Marks · NAT

A mine earns

\

20\ \text{M}

r e v e n u e w i t h

12 M

costs; the tax rate is

30%

. The profit after tax is ______ \$M. (Round off to two decimal places.)

Q3HARD2 Marks · NAT

Gross revenue is

\

50\ \text{M}

, r oy a l t y

8\%

o f r e v e n u e, o p er a t in g cos t

30 M

, tax

25%

. The profit after tax is ______ \$M. (Round off to two decimal places.)