Century Mining Pty Limited v The Commissioner of State Revenue

This case was a tax appeal brought by a mining company after an unsuccessful objection and further objection to an assessment of mining royalties payable to the Commissioner for State Revenue (the “Commissioner”). The mining company had claimed the costs of transporting zinc concentrate from a port to the ocean-going vessels in an anchorage as deductible marine costs for the purpose of calculating mining royalties otherwise payable to the Commissioner. The tax appeal turned on whether the costs claimed by the mining company were marine costs, and therefore, allowable deductions. Justice Treston held that the costs claimed by the mining company in this case were not allowable deductions on a proper construction of the definition of “marine cost” in s 54(4) Mineral Resources Regulation 2013. The tax appeal brought by the mining company was dismissed.

Treston J

4 July 2024

Background

Century Mining Pty Ltd (“Century Mining”) holds mining leases over the operation of the Century Mine located 250 kms north-northwest of Mount Isa (the “Century Mine”). [1]. Century Mining exports zinc concentrate out of the Port of Karumba which is in the south-east corner of the Gulf of Carpentaria 530 km west of Cairns. [1]–[2]. Century Mine hydraulically mines and processes tailings that contain the mineral zinc. [7]. This process produces a “zinc concentrate slurry”. [6]. The zinc concentrate slurry is then pumped via a 304 km pipeline to a facility at the Port of Karumba. [6]. The zinc concentrate slurry is then processed again into a dried concentrate. [6]. The zinc concentrate is then loaded onto a trans-shipment vessel, the MV Wunma, where it is transported to larger bulk carrier vessels known as “ocean-going vessels” anchored outside of the Port of Karumba in an area of deeper water known as the roadstead anchorage. [8]. After the MV Wunma transports the zinc concentrate to the ocean-going vessels, the ocean-going vessels then transport the zinc concentrate to ports outside of the State. [9].

The stage of Century Mining’s process which involves the MV Wunma was referred to as the “trans-shipment operations”. [11]. Century Mining claimed the costs incurred as a result of the trans-shipment operations as a “marine cost” as defined in s 54(4) Mineral Resources Regulation 2013. [11]. The costs fell into a number of categories identified by Century Mining e.g. vessel operations and maintenance, port fees and charges and vessel re-fit and dry-docking costs. [11]. When Century Mining lodged its quarterly royalty returns for the Century Mine pursuant to s 35(1)(a) Mineral Resources Regulation 2013 it had deducted the costs associated with the trans-shipment operations as a “marine cost”. [14]. The Commissioner disallowed these deductions both initially (“the Objection Decision”) and upon further reconsideration (“the Further Objection Decision”). [14]. Century Mining lodged a tax appeal against the Objection Decision and the Further Objection Decision in the Supreme Court pursuant to ss 69 and 70 of the Taxation Administration Act 2001. [15]–[21].

The tax appeal turned on the meaning of “marine cost” in s 54(4) Mineral Resources Regulation 2013:

“54Value of minerals

(1)Subject to subsection (3), the value of a mineral must be worked out by—

(a)working out the gross value of the mineral under part 5; and

(b)subtracting the following amounts from the gross value—

(i)any marine cost for the mineral;

…

(4)In this section—

marine cost means—

(a)for coal—

(i)a cost relating to a late despatch of the coal from a port; or

(ii)a freight or an insurance cost relating to the transport of the coal by water to a port outside the State; or

(b)for another mineral—a freight or an insurance cost relating to the transport by water, to a port outside the State, of—

(i)the mineral; or

(ii)if the mineral is oil shale that has been processed—the oil processed from the oil shale”. (emphasis in original) [22].

Whether the costs of the trans-shipment operations were marine costs

Justice Treston analysed the text of the Mineral Resources Act 1989 and the Mineral Resources Regulation 2013: see [28]–[35]. It was common ground that the relevant mining royalty was calculated with reference to the value of the zinc concentrate which was its gross value after deduction of the “marine cost” as defined in s 54(4)(b) Mineral Resources Regulation 2013. [37]. Justice Treston held that the freight and insurance costs relating to transport by water to a port outside the State does not include the costs to transport the mineral to the point of loading on an ocean-going vessel, nor does it include activities occurring at or prior to the point of loading onto an ocean-going vessel. In her Honour’s view only freight or insurance costs “relating to transport by water” were deductible costs and the words “relating to transport by water” should not be construed broadly to include other costs such as those “incidental, ancillary or relating to freight (or insurance)”. The marine costs contemplated by the definition are freight and insurance costs “relating to transport by water” and those costs arise in relation to activities occurring, or risks arising, after the mineral is loaded onto an ocean-going vessel: see [69]–[94]. The following costs, therefore, were not marine costs:

• the costs of dredging the channel at the Port of Karumba which allows the MV Wunma to sail every day of the year: see [95]–[99];
• the costs of a vessel drydock and class survey for the MV Wunma which regulators require Century Mining to undertake every five years: see [100]–[103];
• port fees and charges which Century Mining must pay to operate the MV Wunma in the Port of Karumba: see [104]–[105];
• vessel management fees charged by another company in relation to managing the operation of the MV Wunma: see [106]–[108];
• vessel operations and maintenance fees in relation to the MV Wunma which were incurred by another company but “passed on” to Century Mining: see [109]–[113];
• consumables required for operating the MV Wunma (e.g. lubricants, cleaning equipment, etc): see [114]–[115];
• travel expenses incurred by another company in relation to staff managing the MV Wunma travelling to and from the Port of Karumba: see [116]–[119];
• insurance premiums for the hull and machinery of the MV Wunma (whilst an insurance cost, it did not relate to transport by water to a port outside of the State): see [120]–[124]; and
• the costs of diesel fuel used to operate the MV Wunma and another vessel (the diesel fuelled the MV Wunma only for the purpose of loading an ocean-going vessel): see [125]–[128].

Disposition

The tax appeal was dismissed. [130].

D Kerr of Counsel