U.S. fertilizer firm Mosaic Co. expects Saskatchewan’s new changes to its potash royalty structure to cost the company up to an extra US$100 million in 2015.
Minnesota-based Mosaic said Monday its “expected impact” from Saskatchewan’s retroactive move in its 2015 budget will increase the company’s 2015 pre-tax payments by $80 million to $100 million (all figures US$).
The Saskatchewan government on March 18 temporarily restructured the profit tax portion of its Crown royalty structure for potash, retroactive to Jan. 1, so all potash mining firms’ capital investments would be allowed to accrue at a 120 per cent rate.
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However, under the restructured system, those investments are deductible from annual gross sales revenues at a 20 per cent declining balance rate for mine operation and maintenance expenditures, and at a 60 per cent declining balance rate for investments in mine expansion or new mine development.
This way, the province said at the time, it would get an “immediate temporary increase in revenue” by deferring those deductions for current capital spending to future years — and the total deductions potash producers get from their capital spending would play out over a longer time period.
Mosaic, which operates Saskatchewan potash mines near Esterhazy, Colonsay and Belle Plaine, in February had forecast its total potash royalties owing to the Saskatchewan government to run between $215 million and $275 million.
The company said Monday it’s “continuing to assess potential ways to mitigate the increase” and expects to update its overall guidance for investors on April 30.
The province has called its move as “an interim step that will be followed by a review of the entire potash royalty and taxation regime.”
Saskatoon-based PotashCorp has already said it expects the new rule to bite into its pre-tax 2015 earnings by $75 million to $100 million.
Saskatchewan’s total potash revenue for 2015-16 is now forecast at $796 million in 2015-16, up $399 million from its 2014-15 budget forecast for that year. — AGCanada.com Network
