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Form 5 and Exemption from Expenditure (WA)

Form 5 and Expenditure

Expenditure conditions are prescribed for Exploration, Prospecting and Mining Licences. Reporting on these is an annual obligation.

The relevant sections of the Mining Act and Regulations that govern of the Form 5 compliance are sections 51, 68, 70H, 82, and 115A and regulations 16, 22, 23 e, 32, 96B and 96C.

Regulation 21 stipulates the expenditure requirements for exploration licences. Refer to - Expenditure requirements of exploration licences

To accommodate a company's monthly accounting processes, the expenditure in the month of a tenement's anniversary may be reported in the current or following year of that tenements anniversary.

The Operations Report - Expenditure on Mining Tenement is required to be lodged within 60 day of the anniversary date, online or by paper form. The DMP is seeking to make it compulsory to lodge expenditure online.

At the end of the Form 5 are instructions what can be included in each expenditure category. The DMP have also published a guide for completing a Form 5 see this link - Guide to Completion of Form5 .

A.MINERAL EXPLORATION ACTIVITIES

Geological activities: geological mapping, sampling, drilling supervision, core logging, non-core drill-sample logging, geological data processing and interpretation, petrology, planning of exploration programs, report preparation; where appropriate, general prospecting can be added here.

Geochemical activities: geochemical sampling, analysis of surface geochemical samples or subsurface drilling samples, geochemical data processing and interpretation. ALSO show number of samples collected.

Geophysical activities (surface/subsurface): ground geophysical surveys, downhole logging, geophysical data processing and interpretation.

Airborne geophysical activities: aerial survey costs, geophysical data processing and interpretation.

Remote sensing activities: aerial photography, remote sensing images, photo interpretation, image processing and interpretation.

Mineralogical activities (exploration for diamonds, heavy mineral sands, etc.): bulk sampling, mineral separation, mineralogy and analysis of diamond indicator minerals or other minerals.

Surveying activities: gridding, line clearing, grid tie-in, tenement boundaries, etc.

Core drilling: diamond drilling costs (including pre-collar open-hole non-core drilling), access road and drill-site preparation; ALSO show metres drilled and number of holes completed.

Non-core drilling: drilling costs, access road preparation; ALSO show metres drilled and number of holes completed. Costs for deep geochemical sampling by auger or air-core drilling can also be shown here. (N.B. Specify drilling for groundwater supply.)

Costeaning: plant and equipment hire for trenching and bulk sampling.

Field supplies: exploration equipment, consumables and supplies, plant and equipment hire, fuel, oil, etc., depreciation of direct exploration equipment, wages for non-professional field personnel.

Drafting activities: drafting equipment, consumables and supplies, salaries for drafting personnel.

Travel: travel costs directly associated with mineral exploration activities conducted on the tenement.

Field camp activities: establishment and maintenance of exploration base camps, food and accommodation, vehicle costs, contractor helicopter support.

Environmental: environmental studies.

Feasibility study activities: [no further information has been given for this section]

Rehabilitation activities: [no further information has been given for this section]

B.       MINING ACTIVITIES (DEVELOPMENT AND PRODUCTION) Mine planning, open-cut mining, underground mining, shaft sinking, decline construction, underground drilling, pre-blast bench drilling, ore treatment, construction and maintenance of ore stockpiles, waste dumps, tailings dams and dumps, etc. ALSO show tonnes mined or treated. Any costs associated with care and maintenance on an idle mining operation can also be shown here.

C.       ABORIGINAL HERITAGE SURVEYS Evidence that a survey has been conducted must be provided to the Department.

D.       ANNUAL TENEMENT RENT AND RATES Rental and local government rates, paid in connection with the mining tenement each year.

E.       ADMINISTRATION AND OVERHEADS All non-field activities such as head office costs, accounting, mining tenement management, administration, research, literature studies, training, etc.

F.       LAND ACCESS/NATIVE TITLE All other native title and land access costs including private land access costs but excluding payments for compensation. N.B. The amount allowed under E and F not to exceed 20% of the minimum expenditure commitment or the total expenditure incurred on activities, whichever is the greater.

The Courts in numerous cases have stipulated what can be included as expenditure, refer to M Hunt Mining Law in WA The Federation Press for further elaboration. Mining Law in WA, M Hunt

The following are deemed to be expenditure for mining (s8 has a wide definition of mining including fossicking, prospecting and exploring for minerals, and mining operations ) :

  1. r96C lists
    1. Aboriginal heritage surveys even while the tenement is an application ??application.
    2. Rehabilitation even in connection with a tenementtenement.
    3. Annual rent and ratesrates.
    4. Administration and land access costs up to 20% of commitment or 20% of total expenditure, whichever is greater
    5. Cutting and polishing minerals
    6. Aerial surveys
  2. s118A A persons expenditure where the person has been authorised in writing to carry out mining by the tenement holder.
  3. The courts hold the following as expenditure (M Hunt Mining Law WA 4th Edition Federation Press p181):
    1. Cost of travel to and from the tenement except for viewing
    2. Cost of accommodation and field supplies except where they are normal living expenses
    3. Drilling costs
    4. Metal detecting, dollying, panning and sampling except when taken place at home. Note that the Warden used the value of person's time as ascribed in Minimum Conditions of Employment Act 1993
    5. Cost of plant and equipment in the year of purchase
    6. Earth moving equipment hire including environmental rehabilitation and walking it into a tenement but not off the tenement
    7. Stationery and office equipment
    8. Maps and plan printing
    9. Evaluation and assessment of geologists (desk top studies), geological reporting, core storage, tenement administration: see Commercial Properties P/L v Italo Nominees P/L
    10. Tools and equipment
    11. Wages and supervisory work
    12. Payment is not required as long as a liability is incurred eg a geologist writing a report.

The following is deemed not expenditure:

  1. r96C states
    1. Marking out a mining tenement
    2. Costs associated with the sale of mining tenement
    3. Research not related to a specific tenement
    4. Compensation payments
  2. The courts have deemed the following is not expenditure
    1. Depreciation of plant and equipment Craig v Spargos Exploration NL (M Hunt doubted the authority of this decision)
    2. Caretakers expenses; though where a caretaker was undertaking mining related activities (environmental monitoring) it was deemed allowable
    3. Loss on sale of fixed assets
    4. Research by the holder
    5. An optionee conducting research on whether to exercise the option. Also applied for a due diligence by a prospective purchaser
    6. Food and accommodation that are normal living expenses
    7. Share of gold paid to a tributer
    8. Expenses relating to use of the mineral after production eg marketing and freight
    9. Hire of ones own vehicle

Mandatory Online Submissions of Operations Reports

Policy Guidelines for Auditing Operations Report

Exemption from Expenditure

Group Expenditure.........

Applying for an Exemption

Policy Guidelines Exemption from Expenditure

Under the s102 of the Mining Act an exemption from expenditure may be granted for the following reasons:

  1. The title to the mining tenement is in dispute: s102(2)(a).
  2. Time is required to evaluate work done, to plan future exploration or mining or to raise capital: 102(2)(b).
  3. Time is required to purchase and erect plant and machinery: 102(2)(c).
  4. The ground the subject of the tenement is for any sufficient reason unworkable: s102(2)(d).
  5. The ground the subject of the mining tenement contains a mineral deposit which is uneconomic but may become economic or market problems make the mining enviable: s102(2)(e).
  6. The ground of the mining tenement contains ore required to sustain future operations of an existing or proposed mining operation:s102(2)
  7. Political, environmental or other difficulties in obtaining requisite approvals prevent mining or restrict it in a manner that is, or subject to conditions that are impracticable: s102(2)(g)

Refer to p206 -p222 M Hunt Mining Law WA 4th Edition Federation Press for greater explanation.