16 October 1989 Income Tax Severed Letter AC58556 - Meaning of "the Prime Metal Stage or its Equivalent"

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

G.R. White
         957-8585

         Director General
         Tax Policy Analysis Division
         Energy, Mines & Resources Canada
         Room 706, 580 Booth Street 
         Ottawa, Ontario
         K1A 0E4

         Attention: Mr. Donald G. Schell
                    Director 
                    Mining Tax Legislation 
                       Interpretation Division

         October 16, 1989

         Dear Sirs:

         Re: The meaning of "the Prime metal stage or its        

             equivalent"; Computation of resource profits,
             subsection 1204(1) of the Income Tax Regulations

         We are writing to request your comments on a letter from
              19(1)     to our Vancouver District Office in which
         they ask a number of questions dealing with at what time
         the prime metal stage of a particular ore is reached
         when there is a series of commercial products or
         byproducts produced therefrom.

         The Vancouver District Office has apparently mentioned
         to        19(1)     that the stage of normal commercial
         purity of the ore is one of the criteria the department
         uses in making the determination of whether something is
         at the prime metal stage or its equivalent.  They have
         stated that this is the stage where customers normally
         accept a product and where there is usually more
         commercial trade than at any other.  It is our 
         understanding, this criteria is generally used for non-
         metallic minerals and may not be appropriate in all
         instances.

         In the case at issue,     19(1)     has framed its
         questions in the context of processing bauxite ore where
         there is a series of commercial products arising in the
         processing of such ore into aluminum ingots.     19(1)
         has asked the following questions on which we request
         your comments:

         1. In general, is the prime metal stage for any ore a
         question of fact to be determined by the quantity of
         sales of a product arising in the processing of that
         ore, or is it purely a matter of industry practice
         which determines the issue?

         2. In the aluminum industry, is the "alumina stage",
         which arises in the production and processing of
         bauxite ore, ignored in determining the "prime metal
         stage or its equivalent" of bauxite since it is the
         generally accepted practice of the industry to process
         such alumina to the "aluminum ingot stage", the prime
         metal stage of bauxite ore - notwithstanding that such
         alumina may be commercially transacted at the former
         stage without undergoing any further processing?

         3. Does the answer to question 2 turn on whether a
         particular taxpayer processes and sells alumina as a
         primary product with say only a portion of the alumina
         processed further by him and sold as aluminum ingots,
         i.e. can the "prime metal stage" of a specific ore
         bauxite - change as between taxpayers or is it constant
         once industry usage as a whole is established?

         Attached is a copy of the     19(1)     letter to the
         Vancouver District Office.  If anything further is
         needed     19(1)     has requested that you call them
         direct.

         Yours truly,

         C. Gouin-Toussaint
         Director
         Bilingual Services and Resource
            Industries Division
         Rulings Directorate