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Mine Model Outline
This purpose of this model is to provide a comparative assessment of the different fiscal instruments commonly utilized in IBAs and their ability to generate income for IBA participants.  The model specifically compares the present values of the estimated economic rents that accrue to First Nation governments, the Federal and B.C. Provincial governments, and the mine operator. Its intended audience is First Nations’ governments; however, ideally the model would be shared by all parties so that negotiations over the fiscal instruments are rooted in a common understanding.

It is important to note that this model is representative only.  It is based on a copper-gold producing mine in Northern B.C. and the assumptions and input variables are subject to change over time.  That being said, with appropriate adjustments to the key inputs the model can be adapted to a range of mineral extraction projects.

The flow of the model is essentially top down.  Mine revenues are derived from the mineral volumes extracted and sold at the market commodity prices. Associated mine expenses (including taxes and IBA payments) are then incorporated into the model on either a fixed or variable basis and finally capital costs and the associated funding mechanisms are added to complete the project cash flow analysis.  From here, mine economic rents are derived using the definition previously outlined in the section 1.3 of this guidebook. These rents are then further segregated into those collected by the First Nations government, Federal/Provincial government, and mine operator

The model ignores discrepancies between the timing of revenue & expense recognition and actual cash flows.  For example, it is assumed that all minerals extracted are sold immediately and that the mine operator holds no inventory or accounts receivable.  Similarly, it is assumed that expenses are paid as they accrue and there are no accounts payable.  This may result in some inconsistencies between the forecasted and actual results on a year to year basis, but over the lifetime of a mine this will have little significance.

Separately, the model calculates the revenues and economic rents generated by the First Nations government and the Federal/Provincial government through their employment of IBA fiscal instruments and tax and royalty regimes, respectively.

The resulting summary outputs of the rent distributions are then presented in tables and graphs.