Dáil Éireann - Volume 390 - 18 May, 1989

Ceisteanna—Questions. Oral Answers. - Mining Leases.

15. Tomás Mac Giolla asked the Minister for Energy if, in view of the failure of Tara Mines to pay any royalties to date despite being in operation for more than ten years, the Government will ensure that any future mining leases specify that a royalty should be payable on each tonne of ore extracted from the ground, rather than on disclosed profits; and if he will make a statement on the matter.

Mr. Smith: As the Deputy will be aware from my recent announcement, the question of payment of royalties by Tara has been resolved in a most satisfactory way. The terms of any future mining lease will be a matter for my discretion based on the individual circumstances of each case.

Mr. McCartan: I am most disappointed at the Minister, who had earlier described himself as helpful. Would he not agree that the saga of Government involvement in Tara Mines is probably the sorriest story that has ever emanated from his Department or any Government dealing with the area of natural resources? In 1988, a company achieved profits of £18.5 million; over their period of life to date they have extracted 4.25 million tonnes of zinc and until this month had not paid one penny in royalties. Would he not agree that this is a disgrace and a national scandal? Would the Minister not agree also that if one lesson clearly comes out of this matter, it must be that the Government should change the base on which royalties are extracted from companies? In other words, it [663] should not be based on profit — we have been danced about by the owners of Tara — but based on the rate at which ore is extracted or the resources taken from the seabed or wherever else. Surely Government can make that decision in principle if nothing more.

Mr. Smith: While I am entirely satisfied, and any independent assessment of the deal that has been done on Tara substantiates this, that that was a successful conclusion from the State's point of view, I admit it is in the State's interest in any future deliberations of this kind to change some of the ground rules in regard to the way that arrangement is structured. While I would not go so far as to describe it in the way the Deputy has, it was a rather unique arrangement. Thank God, we have nothing like the same problems with a number of other companies and mining operations.

Suggestions have been made to move away from royalties based on profits and on to tonnage. It may be that there are certain kinds of mines where royalties on the basis of tonnage would be a desirable option. One would have to take into account here the difference between the ore and the waste. There are problems in using that type of criteria and maybe in the long run a blend or mix of the two would be more desirable. There are lessons to be learned and I intend to examine any new cases in the light of these experiences.

Mr. R. Bruton: Has the Minister scope at this stage for looking at the royalty terms of the other major finds that now exist in Ireland on this point? If not, will he be in a position to publish, in the way he did in the case of oil terms, some royalty system perhaps with allowance for marginal fields or whatever, so that the House can be assured that the lessons have been learned from this experience and that we will not be left depending on what emerges?

Mr. Smith: It is very difficult to go down that road completely. Naturally, I [664] am very interested in trying to keep things as open as possible, but there is a terrific variation in mining operations. In certain mining considerations if you were to operate on a tonnage basis, particularly those that are more or less on the margin of being commercial, with the risk involved, you may well end up not being able to get the operation off the ground or you may force a premature closure, losing jobs etc. Bearing in mind the different constraints, I will go as far as I can to prepare a blueprint for this area, but the Deputy will have to take into account that ultimately I will have to make decisions on the basis of each operation. The general principles on which the State would negotiate contracts concerning royalties, dividends, etc. can be put in place by allowing the Minister, depending on the kind of mine, to have the greatest degree of flexibility possible.

Mr. P. O'Malley: Is it not the case that the ground rules do not need to be changed in the sense that the terms under which a mining company would extract ore from the ground are not agreed until a mining lease has been issued, and the exploration lease which they are given to determine whether there are any resources there at all does not lay down any preconditions under which it would be extracted? Effectively, the Minister has total freedom to impose whatever kind of taxation, royalty or State participation system he wishes. In view of what Deputy McCartan referred to in relation to Tara Mines, where the State obtained no royalties, would the Minister agree it would be much more appropriate and to the benefit of the State that we should go for production royalties? In relation to Tara the Minister confirmed he was very satisfied with the price. About one third of the price included writing off royalty payments which were due to the Government anyway. That is all the more reason we should have a production system.

An Ceann Comhairle: This is a long question.

[665] Mr. Smith: I am having problems with Deputy O'Malley today.

Mr. P. O'Malley: They are all genuine points.

Mr. Smith: Let us be clear about writing off — these words are used deliberately — royalties. As Deputy McCartan said here, and Deputy O'Malley and others have said in other places, we did not get one penny in royalties.

Mr. P. O'Malley: You did.

Mr. Smith: I did not interrupt the Deputy. We did not get one penny. When people assess royalty entitlements I expect the Deputy, as a businessman, not to try to put in concrete terms royalty entitlements where you have not been able to extract one penny for royalties up to now. When someone tries to put that complexion on it what we are really talking about is somebody's estimate of what might have been.

Mr. P. O'Malley: Have the State looked for royalty payments to the extent of £11 million or not?

An Ceann Comhairle: Let us hear the Minister.

Mr. Smith: No. The only claim made was made in 1986 for £4.8 million which was the estimated royalties due over the first ten years and which were subsequently refined——

Mr. R. Bruton: Up to 1984.

Mr. Smith: ——by the Revenue Commissioners in the light of their discussions with Outokumpu to a figure representing something like £1.5 million, from my recollection. Clearly, in the context of this deal trying to suggest that there was a writing off of royalties when we were not able to do so because of the way that deal was structured and subsequently diluted, is a totally wrong stance. This was a global outcome to successful negotiations in an [666] area where we had failed absolutely to get a penny up to now.

An Ceann Comhairle: That must be the end of questions for today.

Mr. Kenny: As Questions Nos. 17 and 20 were not reached, is it in order for me to have them withdrawn and resubmitted for oral answer on the next occasion?

An Ceann Comhairle: Yes, Deputy, we will facilitate you in that regard.