Royalty Reserve vs. Short Working

Royalty reserve and short working are two terms used in the mining industry. Both terms refer to the difference between the actual amount of minerals extracted and the amount of minerals that the mining company is required to pay royalties on. However, there are significant differences between the two terms.

Royalty Reserve

Royalty reserve refers to the amount of minerals that the mining company is not required to pay royalties on. The mining company may be allowed to deduct certain expenses from the amount of minerals extracted before calculating the royalty payment. These expenses may include:

- Mining and processing costs
- Transportation costs
- Marketing and selling costs
- Other expenses related to the mining operation

The amount of the royalty reserve varies depending on the specific terms of the mining lease or agreement. The mining company must maintain records of the royalty reserve and report it to the relevant authorities.

Short Working

Short working, on the other hand, refers to the amount of royalties that the mining company owes but has not paid because it has not extracted enough minerals to cover the royalty payment. This can happen when the mining company experiences production difficulties, such as equipment breakdowns or disruptions to the mining operation.

The mining company is required to make up the short working in subsequent years when it extracts more minerals than required to cover the royalty payment. If the mining company is unable to make up the short working within a certain period of time, it may be required to pay interest or penalties.

Key Differences

The key differences between royalty reserve and short working are:

- Royalty reserve refers to the amount of minerals that the mining company is not required to pay royalties on, while short working refers to the amount of royalties that the mining company owes but has not paid.
- Royalty reserve is calculated based on certain allowable expenses, while short working is calculated based on the actual amount of minerals extracted.
- Royalty reserve is a benefit to the mining company, while short working is a liability that the mining company must make up in subsequent years.

In conclusion, royalty reserve and short working are two important terms to understand in the mining industry. While both terms refer to the difference between the actual amount of minerals extracted and the amount of minerals that the mining company is required to pay royalties on, they have significant differences in terms of calculation and impact on the mining company.