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Quantitative impacts of royalties on mineral projects

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  • Lilford, Eric V.

Abstract

Policy-makers and legislators, typically representing a government body, are quick to impose royalties and other measures to secure income from natural resources operations. While this is undeniably appropriate, the question that is seldom asked by the same regulators is what impact does such an imposition beyond profit-based taxes have on the actual operation. Through taking away a percentage of the revenue that would otherwise have been due to the operation, what will the royalty do to the Resources-base, to the economic life of the operation, or to employment at the operation in the longer term? What royalty rate is optimal, being at what rate the operator pays and the government receives an equitable amount of revenue, and beyond what rate will the impact raise the possibility that the operator decides to discontinue operating? This paper introduces and quantifies a number of the impacts, including resources sterilisation, associated with royalties in the resources sector, using a gold operation as an example to outline the consequences of royalties based on revenue.

Suggested Citation

  • Lilford, Eric V., 2017. "Quantitative impacts of royalties on mineral projects," Resources Policy, Elsevier, vol. 53(C), pages 369-377.
    • Handle: RePEc:eee:jrpoli:v:53:y:2017:i:c:p:369-377
    DOI: 10.1016/j.resourpol.2017.08.002
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    References listed on IDEAS

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    1. James Otto & Craig Andrews & Fred Cawood & Michael Doggett & Pietro Guj & Frank Stermole & John Stermole & John Tilton, 2006. "Mining Royalties : A Global Study of Their Impact on Investors, Government, and Civil Society," World Bank Publications - Books, The World Bank Group, number 7105.
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    5. Haque, Md. Aminul & Topal, Erkan & Lilford, Eric, 2014. "A numerical study for a mining project using real options valuation under commodity price uncertainty," Resources Policy, Elsevier, vol. 39(C), pages 115-123.
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    Cited by:

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    2. Yıldız, Taşkın Deniz, 2022. "How can the state rights be calculated by considering a high share of state right in mining operating costs in Turkey?," Resources Policy, Elsevier, vol. 75(C).

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