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company shows that the property should be developed, the junior
company and the senior company typically agree for the junior
company to keep an ownership interest in the property.
C. The Ontario Mining Tax (OMT)
1. Application of the OMT
The OMT applies to every mine in Ontario to the extent that
its OMT profits exceed a statutory exemption. Mining Tax Act
(MTA), Rev. Stat. Ont. (R.S.O.), ch. 140, sec. 3 (1972). In most
cases, the OMT is imposed on the mine operator. Id. sec. 2(2).
The mine operator is the party that has the right to produce and
sell minerals from the mine. Id. sec. 1(g). The OMT does not
apply to holders of royalties.
2. OMT Profit
Profit for OMT purposes is the difference between either
gross receipts from production or pit’s mouth value and certain
expenses, payments, allowances, and deductions. Id. sec. 3(3).
Under the MTA, there are three ways to calculate the amount from
which deductions and allowances are subtracted to compute profit
for OMT purposes. Id. sec. 3(3)(a), (b), and (c). First, if an
OMT taxpayer sells ore without processing it, gross revenues are
the total receipts from selling the ore. Id. sec. 3(3)(a).
Second, if an OMT taxpayer processes ore before selling it, the
OMT taxpayer subtracts deductions and allowances from the market
value at the pit’s mouth of the mined minerals. Id. sec.
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