Mining Royalties and Statistics in NSW — Guidelines for Compliance — Non Coal

1 January - 31 March 30 April

1 April - 30 June 31 July

1 July - 30 September 31 October

1 October - 31 December 31 January Titleholders are responsible for ensuring that:  information relating to their titles is accurate and up-to-date;  completed and signed royalty returns in respect of all titles held are lodged with the Department, together with the royalty payment when due; and  details and maps are kept of areas of extraction and a breakdown of mineral recovered from different land portions. 2 <!-- page break --> Calculating the Quantity and Value of Mineral Recovered The return will provide a separate sheet for each mineral available to be mined by the leaseholder and the applicable royalty rate (see Appendix 2 for the current rates). The royalty will be calculated on the minerals recovered during the period, which includes stock movements. The value of minerals sold will be the first arm’s-length sale that receives market value (typically the invoiced value less offsite processing costs). Where no invoice is rendered the value should reflect spot prices at the time of disposal. The closing stock should be valued at the net realisable value, while opening stock will reflect the value reported during the previous period. Calculating Royalty Payable Quantum Royalty Calculate the royalty payable in Table 3, by multiplying the quantity of minerals recovered, using whole tonnes, by the rate prescribed. Do not complete Table 4, as this relates to the ad valorem royalty. An example of the calculations required for a quantum-based mineral follows: GYPSUM Quantity Amount Tonnes $ Export Sales 0 0 Local Sales or other disposals 7,500 150,000 Total value of disposals 7,500 150,000 Plus value of closing stock 300 @ $20 6,000 (finished product at last sale price or ruling spot price, whichever more closely reflects the realisable value of the stock) Less value of opening stock 500 @ $15 7,500 (as per previous return) Gross value of mineral recovered 7,300 148,500 Amount of royalty payable (at 35 cents per tonne) 2,555 3 <!-- page break --> Ad Valorem Royalty The ex-mine value of minerals recovered will be determined by subtracting total deductions from (Table 4) from the value of mineral recovered (Table 2). Please refer to Appendix 1 for details of assessable income and allowable deductions. Calculate the royalty payable by multiplying the ex-mine value by the rate prescribed for the mineral. An example of the calculations required for an ad valorem-based mineral follows: GOLD Quantity Amount Oz $ Export Sales 4,500 2,600,000 Local Sales or other disposals 3,500 2,000,000 Total value of disposals 8,000 4,600,000 Plus value of closing stock 250 137,500 (finished product at last sale price or ruling spot price, whichever @ $550 more closely reflects the realisable value of the stock) Less value of opening stock 500 312,500 (as per previous return) @ $625 Gross value of mineral recovered 7,750 4,425,000 Less Allowable deductions -  Onsite treatment expenses 1,500,000  Realisation expenses 50,000  one-third of onsite administration expenses 65,000  Depreciation  Treatment Plant 885,223  Tailings Dams 148,833  Component of asset attributable to treatment and realisation: o Workshop 3,938 o Motor vehicles 15,541 o Buildings 15,101 1,068,636 Total allowable deductions 2,683,636 Ex-mine value 1,741,364 Amount of royalty payable (at 4%) 69,654.56 4 <!-- page break --> Additional Statistical Information Employment and Capital Expenditure You must show all personnel employed as at the end of the period, including working managers, partners, employees, contractors, etc. If there was no person employed at the end of the period write ‘NIL’. Show capital expenditure on plant and equipment for the period split between mining of mineral and treatment of mineral. The employment and capital expenditure details (Table 1) should be completed even if submitting a NIL return. Mineral Concentrates Where applicable enter the quantity of ore and mineral concentrates produced during the period. 5 <!-- page break --> Additional Information for Calculating a Royalty Liability Gold loans Gold loan repayments will be valued at the ruling spot price regardless of the valuation at draw down. Forward sales Any transaction which is designed to protect the future value of a mineral will be taken into account in determining the value of mineral recovered. Speculation Any speculative transaction or purchase of mineral will not be considered in the value of mineral recovered. Depreciation Depreciation allowable for royalty purposes is restricted to the proportion of the assets’ utilisation that contributes directly to upgrading the mineral from the first stockpile to disposal. Full depreciation schedules and assets registers must support all claims for deductions.  All assets (except tailings dams) are to be depreciated using the reducing balance method at the rate of 11.25% per annum.  Tailings dams can be depreciated using the straight-line method, over the life of the dam while additional earthworks for the dams may be included in the depreciation schedule or treated as a deduction in the year of expenditure.  Depreciation of assets only applies to the period during which production is underway.  Additions are to be depreciated for part year including the month the expense was incurred.  Disposals are to be depreciated for part year excluding the month of disposal.  A balancing charge applies to disposal of depreciated assets.  For royalty purposes, transfer of assets upon sale to another operation or miner will be at the written down value WDV.  Upon closure of an operation, part- year allowance will be made for depreciation of assets. Refund claims may be accepted in the royalty return for the period following the closure. This specifically addresses the problem of whether the balancing charge is to be written off or disposed of after closure.  If the mine is placed on a care and maintenance basis, a part-year allowance will be made for the current year and the WDV will apply when the mine reopens. 6 <!-- page break --> Records Keeping Accurate Records Titleholders are required to maintain proper and accurate account books relating to minerals recovered. Any officer of the Department must be permitted access to account books, documents and other records relating to the production, treatment and disposal of minerals by the titleholder. If necessary, the Minister will direct the titleholder to make such records available for an officer of the Department to inspect. Examples of the types of records a titleholder should keep are set out in Appendix 3. Privacy and Confidentiality The information, including personal information, collected by the Department for the purposes of royalty is collected under the requirements of the Mining Act 1992. The information is necessary in order to administer the mining laws of the State. The information collected is treated as confidential and specific disclosure provisions are set in Section 365 of the Mining Act 1992, which states: Information obtained about a titleholder’s operations may not be disclosed unless the disclosure is made: a) with the consent of the person from whom the information was obtained; or b) in connection with the administration or execution of the Act; or c) for the purposes of any legal proceedings arising out of the Act or of any report of any such proceedings; or d) for the purpose of any investigation or inquiry conducted by a Warden under the Act; or e) with the concurrence of the Minister. 7 <!-- page break --> Payment Payments of royalty are made to the Office of State Revenue from 1 July 2014. The preferred method of payment is a direct deposit to the Office of State Revenue Bank: Westpac BSB: 032 001 Account number: 205573 Account name: OSR EPS Remitting Account For more information, please go to the link below http://www.osr.nsw.gov.au/royalties/mineral Penalties The Mining Act 1992 provides for fines for offences relating to returns, the provision of information and access to records. If you furnish false or misleading information or fail to lodge a Royalty Return on time the Regulations specify a maximum penalty of $11,000. In addition, a person in charge of premises, where a royalty officer believes records are kept, fails to provide reasonable facilities and assistance may face a penalty of up to $11,000. These penalties may be imposed by a court of competent jurisdiction. 8 <!-- page break --> Disputes If you dispute an assessment you may lodge an objection. If you believe that an incorrect assessment has been issued, action to recover any outstanding debt will be suspended pending investigation of the matter. However, if it is found that the initial assessment is correct, you will be charged continuing interest on the unpaid debt. If you consider that assessment for royalty liability is based on an invalid application of policy or an inappropriate method of calculation, the objection will not be investigated until full payment has been made. The Minister will determine the claim and you will be notified of the outcome as soon as practicable. Any resultant refund will be made within 14 days. Titleholders should note that during a period of indebtedness to the Department all matters before it (e.g. lease renewals, transfers, applications for titles etc) will be viewed in light of any outstanding liability. Under the Mining Act, all disputes are to be investigated by the Minister. 9 <!-- page break --> Appendix 1: Assessable Income and Allowable Deductions Income Includes the revenue realised from the mineral recovered and disposed from the title. This assumes an arm’s length transaction, where the Minister is satisfied that it produces a market value. Speculative activity is not assessable and should be ignored. Sales The $A value at disposal Foreign exchange gains or losses The variation in the $A value at settlement. Forward Trading Where used to protect the value of the mineral. Contangoes Assessable as premium on price of sale. Offsite refining and treatment Assessable as a contra to the sale. Foreign exchange trading Not assessable. Hedging Not assessable. Interest Not assessable. Income from housing rental Not assessable. GST Not assessable. Deductions Allowable deductions are confined to the direct costs incurred in upgrading the mineral, after the first stockpile, and bringing it to market. Income for services provided to external parties should be offset against deductions. Onsite Treatment Transport to first stockpile Not allowable. Crushing and milling Allowable after the first stockpile. Concentration Allowable. Refining Allowable. Assaying and analysis Allowable. Realisation Agents commission Allowable. Intermediate stockpiling Allowable. Transport to point of sale Allowable. Overseas freight Allowable on Cost of Insurance and Freight (CIF) sales. 10 <!-- page break --> Depreciation Depreciation is at 11.25% per annum on a reducing balance, except for tailing dams. Tailing dams are depreciated on a straight line basis over the life of the dam. The claim for the depreciation should be adjusted for the allowable proportion of asset usage. Further definitions are provided in Depreciation section on page 6. Crushing and milling Allowable after first stockpile. Transport Allowable after first stockpile. Refining Allowable. Administration Allowable at 33.33% of the expense Mining Not allowable. Environment Not allowable. Inter- and Intra-company transfers Transferred at the lower of written down or realisable value. Retirement or disposal • At value of sale • Profit or loss on disposal schedule to support claims. Onsite Administration On site expenses which directly have an effect upon the value of the mineral, or facilitate the upgrade of the mineral. Generally Allowable at 33.33%. Bank Charges Allowable. Occupational health and safety Allowable for non mining activities. Contractors and consultants To be considered on a case by case basis. Fringe benefit tax Not allowable, unless provided to all employees. Entertainment Not allowable. Relocation and recruitment Not allowable. Audit fees Not allowable. Offsite administration Not allowable. Housing Not allowable. Sponsorship and promotions Not allowable. Overseas travel Not allowable. Levies and licenses Not allowable. GST on expenses Not allowable. 11 <!-- page break --> Other Not allowable Expenses Other not allowable expenses include: Mining Exploration Survey Rehabilitation Environmental management Interest and financing charges Legal Overseas travel Housing Sponsorship and promotions Entertainment Levies and licenses Relocation and recruitment Royalty Rates 12 <!-- page break -->

Appendix 2 Royalty Rates Mineral Rate of Royalty Mineral Rate of Royalty Agate 4% ex-mine value Garnet 4% ex-mine value Agricultural lime 35 cents per tonne Geothermal substances 4% ex-mine value Antimony 4% ex-mine value Germanium 4% ex-mine value Apatite 4% ex-mine value Gold 4% ex-mine value Arsenic 4% ex-mine value Graphite 4% ex-mine value Asbestos 4% ex-mine value Gypsum 35 cents per tonne Barite 70 cents per tonne Halite (inc. solar salt) 40 cents per tonne Bauxite 35 cents per tonne Ilmenite 4% ex-mine value Bentonite (inc. Fuller’s Earth) 70 cents per tonne Indium 4% ex-mine value Beryllium minerals 4% ex-mine value Iron minerals 4% ex-mine value Bismuth 4% ex-mine value Jade 4% ex-mine value Borates 70 cents per tonne Kaolin 70 cents per tonne Cadmium 4% ex-mine value Lead 4% ex-mine value Caesium 4% ex-mine value Leucoxene 4% ex-mine value Calcite 40 cents per tonne Limestone 40 cents per tonne Chalcedony 4% ex-mine value Lithium 4% ex-mine value Chert 35 cents per tonne Magnesite 70 cents per tonne Chlorite 70 cents per tonne Magnesium salts 40 cents per tonne Chromite 4% ex-mine value Manganese 4% ex-mine value Clay/shale 35 cents per tonne Marble 70 cents per tonne Cobalt 4% ex-mine value Marine aggregate 4% ex-mine value Columbium 4% ex-mine value Mercury 4% ex-mine value Copper 4% ex-mine value Mica 70 cents per tonne Corundum 4% ex-mine value Mineral pigments 70 cents per tonne Cryolite 4% ex-mine value Molybdenite 4% ex-mine value Diamond 4% ex-mine value Monazite 4% ex-mine value Diatomite 70 cents per tonne Nephrite 4% ex-mine value Dimension stone 70 cents per tonne Nickel 4% ex-mine value Dolomite 40 cents per tonne Niobium 4% ex-mine value Emerald 4% ex-mine value Oil shale 4% ex-mine value Emery 4% ex-mine value Olivine 70 cents per tonne Feldspathic materials 70 cents per tonne Opal 4% ex-mine value Fluorite 70 cents per tonne Ores of silicon 4% ex-mine value Galena 4% ex-mine value Peat 70 cents per tonne 13 <!-- page break --> Mineral Rate of Royalty Mineral Rate of Royalty Perlite 70 cents per tonne Vermiculite 70 cents per tonne Petroleum 10% of well head Wollastonite 70 cents per tonne value Zeolites 70 cents per tonne Phosphates 70 cents per tonne Zinc 4% ex-mine value Platinum group minerals 4% ex-mine value Zircon (mineral sand) 4% ex-mine value Platinum 4% ex-mine value Zircon 4% ex-mine value Potassium minerals 70 cents per tonne Zirconia 4% ex-mine value Potassium salts 40 cents per tonne Pyrophyllite 70 cents per tonne Quartz crystal 4% ex-mine value Quartzite 70 cents per tonne Rare earth minerals 4% ex-mine value Reef quartz 70 cents per tonne Rhodonite 4% ex-mine value Rubidium 4% ex-mine value Ruby 4% ex-mine value Rutile 4% ex-mine value Sapphire 4% ex-mine value Scandium and its ores 4% ex-mine value Selenium 4% ex-mine value Serpentine 70 cents per tonne Sillimanite-group minerals 70 cents per tonne Silver 4% ex-mine value Sodium salts 40 cents per tonne Staurolite 70 cents per tonne Strontium minerals 4% ex-mine value Structural clay 35 cents per tonne Sulphur 4% ex-mine value Talc 70 cents per tonne Tantalum 4% ex-mine value Thorium 4% ex-mine value Tin 4% ex-mine value Topaz 4% ex-mine value Tourmaline 4% ex-mine value Tungsten and its ores 4% ex-mine value Turquoise 4% ex-mine value Vanadium 4% ex-mine value 14 <!-- page break -->

Appendix 3 Types of Records Whilst there are basic record-keeping requirements that apply to all titleholders, the extent of records kept depend upon the relative size and nature of mining operations. These may also be dictated by other business reasons. Examples of the types of records that should be kept are summarised below. General record Information required Recommended supporting category records Disposals  Quantity of each mineral  Tax invoice showing transaction (includes all sold or disposed (including date, mineral description, minerals removed minerals consumed by the quantity (eg tonnes, ounces, from the lease leaseholder and/or related grams, carats, etc), value and whether for sale, parties). customer details. further processing  Value of minerals disposed  Weighbridge dockets or or personal use) in Australian dollars (ie total receipts from independent consideration received less transport contractor, showing GST). date of transport and quantity and description of each mineral removed.  Invoice register showing details of sales. Purchases  Quantity of each mineral  Tax invoice showing transaction acquired (from external date, mineral name, quantity, sources). value and supplier details.  Value of minerals acquired (ie total consideration paid less GST). Stockpiles  Quantity of minerals  Annual stockpile survey recovered or purchased that undertaken by an independent have not been sold, surveyor. disposed or consumed by  Working papers showing leaseholder (includes raw calculation of closing stock from and processed minerals production, sales and purchase stockpiled inside and outside records since last survey date. the mine site).  Value of stockpiled minerals based on most recent arm’s-length sale. 15 <!-- page break --> Production  Quantity of minerals  Daily records (with monthly and recovered from each lease annual summaries) showing the held. quantity of each type of raw mineral recovered.  Plans showing the extent of mining activity within each  Daily records (with monthly and lease. annual summaries) showing the input and output of any processes undertaken to improve the quality of the mineral stockpile.  Surveyed maps and/or sketches showing the location within each lease boundary where mining activity has occurred each year. Expenses  Actual costs incurred in  Sketches showing the methods upgrading the mineral from employed to mine and process the first stockpile to a the minerals recovered. marketable state to the  Sketches showing the location extent allowed. General of all stockpiles in relation to the categories: treatment mining and processing sites. expenses, marketing, onsite administration and  Schedules detailing all depreciation. (Please note equipment used at each of the that all mining expenses are mining, transporting, stockpiling Not allowed.) and processing stages.  For guidance on the extent  Tax invoices/receipts. that deductions may be  Other evidence of payments allowable, please refer to such as bank statements,

Appendix 1. cheque butts, credit card statements.  Depreciation working papers.  Notes as to how each expense category relates to the schedule of allowable deductions If you need any assistance in deciding what records are required for your operation please contact the royalty unit on 02 4931 6436. 16 <!-- page break -->