asked the Minister for Energy the portion of the money paid to the State by Tara Mines Ltd. for the purchase of the State's shareholding in the mine which represented payment in lieu of outstanding royalty payments; the portion paid in respect of 1988; the estimated level of royalty payments for 1989; and if he will make a statement on the matter.
Ceisteanna—Questions. Oral Answers. - Tara Mines Ltd.
7.
On 30 June 1989 agreements were concluded between the Minister for Energy on the one hand and Tara Exploration and Development Company Limited and Tara Mines Limited on the other in respect of sale of the State's 25 per cent shareholding in the latter company and in respect of the State's royalty entitlement of 4.5 per cent of the profits of the company as computed by the Revenue Commissioners for corporation profits tax purposes. The shareholding was purchased by Tara Exploration and Development Company Limited and the royalty entitlement was bought out by Tara Mines Ltd. The total consideration for the elements of value being sold was $50 million, of which $16.1 million was deemed to be in full and final discharge of all past and future royalties due to the State.
The figure of $16.1 million was not arrived at through a year by year apportionment of the company's royalty liabilities and a figure in respect of the sum payable in respect of 1988 or any other year is not, therefore, available.
On what basis were future royalties calculated in respect of the $16 million? I cannot even understand in any detail how past royalties were calculated. Can the Minister tell the House how future royalties were calculated to the end of the relevant period without there being any idea of how much ore will be extracted, what profits will be made or anything of that nature?
The Department themselves were involved in the calculations. But, in order to assist them in arriving at the figure, they had the advice of NCB Corporate Finance. Indeed, prior to the negotiations taking place, NCB valued the State shareholding at approximately $30 million and the State's royalty entitlement at approximately £11 million. There were other intangibles with regard to value, that is, according to the Minister, certain restrictive rights with his shareholding and the enhancement of his shareholding in the event that Tara acquired the Bula ore body.
The technical and financial advisers examined the position with regard to the extent of the ore, its value and the State's rights under the existing agreement and arrived at a figure which is considered to have been satisfactory from the State's point of view, particularly in view of the previous value put on it and also in view of other purchases made in that area. For instance, Outukumpu paid Canadian mining interests 90 million US dollars in February 1986 for their 100 per cent holding in Tara Exploration which gave them 75 per cent control of Tara Mines. If one takes that figure into consideration then one sees that the price of 50 million US dollars for 25 per cent of the company obtained by the State here compares very favourably with the deal accepted by the Canadian interest, which included international mining companies such as Northgate Exploration.
I am afraid I do not see that at all as being a favourable deal. The intent of my question has not to do with whether the deal was favourable or not, although I should be interested to know whether the new Minister assuming office really thought it was a good deal. I will confine my supplementary questions to the question of royalties and royalty payments. On what basis did the Government or the Minister take a decision that no future generations, nothing in the future, would ever have to be paid by this company either by way of profits or royalties? Was consideration ever given to altering, by legislation if necessary, the terms of the contract with Tara to charge royalties on ore tonnage extracted rather than on the ridiculous percentage of corporate profits? I have raised this matter every six months since 1983. I have been told repeatedly that the matter was so complex nobody could deal with it. Was consideration ever given to altering the system of royalties to royalties payable on every tonne of ore extracted? Would that not be a more suitable arrangement?
The Deputy will have to accept that I do not have access to discussions or to reasons certain decisions were arrived at prior to my appointment as Minister.
That is nonsense.
It was a Government decision taken at the time. I do not have access to the arguments advanced for and against that decision. The fact is a decision was taken and the figure to be made has been mentioned in my reply and has been paid over to the State.
Is the Minister happy with that?
I should like to assist the Deputy by informing him that, in addition to the advisers commissioned — those I mentioned, the NCB — a very full study of zinc price trends was carried out to assist the Department in this matter by Commodities Research Unit, London, which pointed to the traditional volatility of zinc prices and expectations that zinc prices would decline in the early nineties as new, large scale capacity comes on stream. There is the view that a reasonable deal was done for the State at an opportune time when zinc prices were high but it is not likely that they will remain high continuously. In the circumstances the State seems to have got a fairly reasonable return in the matter and, as the Deputy knows, intends to put the money to very good use elsewhere in the State.
In the absence of Deputy McCartan who made a very hypocritical statement about my absence on Friday last would the Minister say what independent technical advice was received by the Government before this agreement was entered into?
I have already given the source of the independent technical advice.
Would the Minister not agree that the State had already outstanding royalties of $8 million to collect up to the year 1987? In the light of the fact that less than one-third of the mine is used at this stage would he agree that the notion of throwing away all the remaining royalties for just an additional $8 million seems, to the layman, to be an extraordinary capitulation? Perhaps the Minister could shed some little light on that?
I cannot really add an awful lot to what I have said already. I have given the House as many of the facts about the position as I can. The decision was taken before I assumed office. I am not privy to any other information that might have been taken into consideration by the then Government in arriving at a decision. The amount of royalties outstanding and the possible payment of royalties to the State in the future arising from mining activities by this company were all taken into account in arriving at the figure agreed. In the circumstances it does seem that the State got a reasonable deal in the matter.
Would the Minister say whether the NCB projection took into account projected resources available on an annual basis, or the total likely resources over a time period in arriving at their figure or, alternatively, did they project the corporate yield figure? Which of the two mechanisms was used or were both used and balanced in their report to the Department and the Minister?
The Deputy appears to be raising new matter. If he wants additional information he will have to put down another question.
I will make my question simpler. It is not clear from the Minister's several answers to supplementary questions whether either the arrears in terms of royalties or the projected yield from royalties, as calculated, in terms of corporate tax by the Revenue Commissioners was the basis for the figure. My question is a very simple one: were any other criteria used, such as the value of the resources? Yes, or no?
The question relates to the amounts paid. I have given that information. Indeed I have given a lot more information. If the Deputy wants other additional specifics I would invite him to communicate with me later or put down a separate question.
I will do that.
In view of the loss now of any royalties in the future from Tara Mines would the Minister suggest to his colleague, the Minister for Finance, that a return be got from Tara Mines in terms of corporation tax on their profits since there is now no possibility of making money in other ways from them? Would the Minister ensure that the return to the State comes from Tara Mines in terms of tax on profits since the possibility of royalties no longer obtains?
I will convey the Deputy's viewpoint to my colleague, the Minister for Finance.