| 19(1) | File No. 5-8185 |
| G.R. White | |
| (613) 957-8585 |
June 16, 1989
Dear Sirs:
Re: Equivalent to Prime Metal Stage of Gypsum
Further to our meeting of June 6, 1989, we enclose a copy of the letter from the Department of Energy, Mines and Resources (EMR) advising us of their opinion concerning the equivalent to prime metal stage of gypsum mined by 24(1) The excised portions noted in the letter refer to the affairs of other taxpayers.
The examination of the gypsum industry, mentioned on page 2 of EMR's letter was described in another letter and is summarized as follows:
In 1984, there were five non-integrated producers which mined gypsum and shipped it in a crude state, mainly for export. In addition, one gypsum wallboard manufacturer did not have its own source of crude gypsum. There were three integrated gypsum product manufacturers, that had their own upstream gypsum mining operations. In addition there was a cement company which mined gypsum for use in cement manufacturing. Over the years, the gypsum exported in crude form has exceeded by a considerable extent the gypsum consumed domestically for manufactured products, mainly wallboard. Unless a gypsum deposit is located in a heavily populated region, it has been advantageous to establish a finished products plant near the market area instead of near the mine site because the transportation costs of gypsum products are generally higher than for crude gypsum.
The prime metal stage is interpreted using three criteria:
1. Custom. This is a common sense approach which applies to most metals. It is the first stage at which a true metal can be identified, e.g. not copper concentrate or blister copper, but case of non-metallic minerals such as gypsum.
2. A state of normal commercial purity. This is the state where customers normally accept a product and there is usually more commercial trade at this stage than any other. The gypsum, as excavated from the mine, undergoes some limited processing at the mine site, viz. crushing an d sizing for ease of transportation, and perhaps some washing, screening or other simple process to remove impurities. The crude gypsum is shipped to manufacturing plants essentially in the form in which it is mined. The next series of operations, again of a non-complex nature, is further size reduction in hammer and roller mills and calcination to form plaster of paris or stucco. The above are closely associated with the production of wallboard or plaster, which are manufacturing operations.
3. End use A material at the prime metal stage must be suitable for manufacturing, not just for a further mineral processing operation. Copper concentrate is frequently sold commercially but us only suitable as a raw material for smelter product or blister copper, must be refined to cathode copper before it can be used in manufacturing to produce copper wire, brass sheet etc.
Pursuant to our understanding with you, I talked to Mr. Jameer of the Toronto-District Office of Revenue Canada on June 7 and told him that he may now proceed with the assessment of 24(1) for the year currently under audit review.
Yours truly,
ChiefResource Industries SectionBilingual Services and Resource Industries DivisionRulings Directorate