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DIAMOND ROYALTY SYSTEM INTRODUCED

Released on June 2, 2010

The provincial government today introduced a new royalty system for future diamond production in Saskatchewan.

The province is home to the largest diamond-bearing kimberlite field in the world. Although there is currently no diamond production in the province, Saskatchewan-based Shore Gold Inc. has completed a pre-feasibility study and is now doing the detailed analysis required to reach a production decision. Knowledge of Saskatchewan's royalty regime gives the industry a clearer picture of the financial parameters for any potential operating mine in the province.

"We want to ensure any Saskatchewan mines are highly competitive with other mines in Canada and around the world," Energy and Resources Minister Bill Boyd said. "We believe our royalty system addresses that, and will give us one of the most competitive diamond royalty regimes in the country. Our goal is to ensure Saskatchewan continues to attract exploration spending and potential future development."

Saskatchewan's royalty regime features:

  • a one per cent base royalty on the value of mine production, with an initial five-year holiday;
  • a stepped royalty rate on profits to a maximum of 10 per cent once capital investment is fully recovered; and
  • full-cost recognition including a 100 per cent depreciation rate of capital costs and a processing allowance.

Although Saskatchewan's diamond resource is very large, development costs will likely be high relative to a number of other jurisdictions. The royalty regime respects this and strikes a balance between providing a positive climate for growth and a fair return to the province.

Boyd noted that if a mine were to go ahead, the real benefit to the province would be in the economic development it would represent.

"This would be a major undertaking for central Saskatchewan," Boyd said. "There would be positive impacts for many years in Prince Albert and surrounding area."

The royalty system was developed in consultation with the mining industry and reflects its input.

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For more information, contact:

Bob Ellis
Energy and Resources
Regina
Phone: 306-787-1691
Email: robert.ellis@gov.sk.ca

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