PotashCorp Reports Inadequate Royalties
PotashCorp reported today that it paid $81 million of â€œprovincial mining and other taxesâ€ on $975 million of potash sales in the second quarter of 2013. In other words, Saskatchewanâ€™s potash production tax and resource surcharge amounted to 8% of potash sales.
Adding the basic Crown royalty of just over 2% (which PotashCorp includes in the â€œcost of goods soldâ€), the provinceâ€™s total royalty return is just over one-tenth of the value extracted by PotashCorp. As the company exhausts its extremely generous investment write-offs, potash royalties have gone from a nickel on the dollar to a dime on the dollar.
Mining and transport costs amount to only 35 cents per dollar of potash sold. (See page 12 of PotashCorpâ€™s report: ($294 million for the cost of goods sold + $68 million of freight, transportation and distribution)/$975 million of potash sales â€“ the Crown royalty of 2 cents per dollar.) The people of Saskatchewan, who own this lucrative resource, should receive much more than a dime of the remaining 65 cents.