Cumulative Expenditure Account

The Cumulative Expenditure Account includes an allowance for a return on investment that is carried forward from years when there is no Net Revenue. Net Revenue is a cumulative amount that reflects all revenues and expenditures, including capital costs, over the life of a mine.

Each year there is no Net Revenue, after all cumulative expenditures are deducted from all cumulative revenue, the remaining negative amount is carried forward as the Cumulative Expenditure Account.

There are three general criteria for determining what expenditures may be deducted from the Net Revenue of a mine:

• they must be incurred by an operator of that mine
• they must be incurred for the purpose of earning revenue from the operation of that mine
• they must be reasonable in amount

The following expenditures are NOT allowed:

• royalties and costs of purchasing mineral title
• consideration for services rendered or goods received after the end of the fiscal period of the mine
• interest, dividends and costs of financing or arranging financing
• gains and losses on hedging transactions
• for corporations, compensation in excess of $75,000 paid to individuals who own 10% or more of the corporation or an affiliated corporation
• any amount that is a reserve, contingency, allowance or bad debt expense