Tax Court rules in Tharisa’s favour over mining royalties
South Africa’s Tax Court of has ruled in favour of integrated resources group Tharisa ‘s subsidiary Tharisa Minerals, in a long-running dispute with the South African Revenue Service (Sars) regarding the calculation of mining royalties under the Mineral and Petroleum Resources Royalty Act.
The court set aside Sars’s assessments for the 2015 and 2017 years of assessment and directed Sars to recalculate Tharisa Minerals’ royalties using a methodology that recognises the operational realities of metallurgical recoveries and related costs, including the grade recovery curve unique to Tharisa’s orebody.
The judgment also applies to 2016 and subsequent years of assessment.
Sars retains the right to appeal the judgment.
The dispute related specifically to the valuation of platinum group metals (PGMs), with Sars having applied an artificial linear adjustment to increase the reported grade and sales values, Tharisa states.
The miner successfully argued that this approach ignored the actual recoveries and costs incurred in beneficiating the ore.
As at September 30, 2024, Tharisa had conservatively raised a provision of $56.8-million in respect of the disputed mining royalty.
The group is now recalculating the liability, cost of sales and income tax retrospectively from 2015 onwards, applying the court’s principles.
While the final numbers are being determined, the outcome is expected to be materially favourable for earnings, Tharisa states.
“This landmark ruling provides certainty on mining royalties for the life of mine, aligning tax law with the realities of our mining and processing operations. It confirms that royalties should be levied on actual, not notional, income – a critical principle for miners of lower-grade orebodies.
“This outcome vindicates our position and underscores the need for more clarity from a legislative perspective,” Tharisa CFO Michael Jones comments.
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