EXPLAINER Mining Royalties

By Rhiannon Russel

What are mining royalties?
Royalties are what a mine operator pays to the Yukon government for the right to mine the territory’s resources. A mining royalty isn’t a tax, but rather a share of the profits made from the mine.

How much are they?
Placer miners pay $0.375 per ounce of gold exported out of the Yukon. This rate was set in 1906 and is calculated at 2.5% of the value of the gold—set in the Placer Mining Act at $15 per ounce. The rate hasn’t changed since. Today, the value of gold is about $2,300 per ounce. If the rate was pegged to that price, royalties would be roughly $57.50 per ounce.

For quartz mining, royalties are based on a mine’s revenue—the higher the revenue, the higher the royalties. For instance, a quartz mine that brings in more than $10,000 but less than $1 million pays 3% in royalties. That percentage continues to rise to a maximum up to 12% if revenues exceed $35 million.

How are First Nations involved?
As per the Umbrella Final Agreement, self-governing First Nations receive royalties for mining conducted on their category A settlement land. Additionally, they get a share of royalties collected on crown land. The Yukon Mineral Development Strategy and Recommendations, a 2021 report produced by an independent panel, stated that because the Yukon government collects, on average, less than $100,000 a year in royalties on crown land and category B settlement land, “only a negligible amount” has been shared with self-governing First Nations.

How is the federal government involved?
Under the Yukon’s resource-revenue-sharing agreement with Canada, the territory keeps a maximum of $6 million in revenue from natural resources, including mining royalties. Any revenue above this cap is offset against the annual territorial formula financing (TFF) transfer payment the Yukon receives from the feds, meaning that for every dollar earned over $6 million, a dollar is deducted from the TFF payment.

For several years, resource revenue has been below the cap, though it rose from about $1 million in 2020–2021 to $11.9 million in 2021–2022—mainly due to higher quartz-mining fees and leases. As per the agreement, the Yukon can choose instead to split resource revenue 50-50 with the feds—with no cap—but once implemented, that option isn’t reversible.

How might royalties change in the future?
In 2021, the Yukon government began working on new legislation to replace the existing Placer Mining Act and Quartz Mining Act. One of the calls in the Yukon Mineral Development Strategy and Recommendations is to “modify Yukon’s quartz royalty and fee regime in the modernized mineral resource legislation to ensure all Yukoners receive fair, meaningful, and transparent financial returns from mining activities while also ensuring competitiveness with other Canadian jurisdictions.”