On Monday, the Parti québécois government announced a new mining royalty regime. Its hybrid proposal combines aspects from two types of royalty systems: profit-based and ad valorem royalties. In this blog post, we will demystify these ways of calculating royalties in order to best analyze the government's choice as well as what its implications are.

Let's start with a small yet important clarification: all mining royalty regimes must deal with the cyclical nature of metal markets, which periodically increase and then decrease. When metal prices are high, mining companies naturally tend to generate more profits than when prices are low. These fluctuations obviously affect royalties.

Profit-based royalties

Change the conversation, support rabble.ca today.

In the beginning of December, the Harper government gave its approval to two takeover deals in the energy sector. Nexen is involved in offshore production operations around the world and in oil sands in western Canada. It will now be the property of CNOOC, a Chinese corporation. The second deal sealed Progress Energy's takeover by the Malaysian giant Petronas.

Negotiations concerning the Canada-European Comprehensive Economic and Trade Agreement (CETA) are well underway. Many major issues for Québec's future are being discussed, notably the conditions under which European businesses will be allowed to tender for supplier, service, and construction contracts from the Québec state.

According to a meeting held on this past October 5 between the government and social stakeholders, if these agreements are confirmed, they will allow European businesses to tender for government service requests and supply call-forwards in all contracts above $315,000. Furthermore, European businesses will be allowed to tender for government infrastructure contracts greater or equal to $8.15 million.