## pr1715mineralspricing

## Source details

**Canonical URL:** [pr1715mineralspricing](https://www.imf.org/-/media/files/news/press-release/pr1715mineralspricing.pdf)

## Other formats

- [Markdown version](/-/media/files/news/press-release/pr1715mineralspricing.pdf.md)
- [Structured JSON version](/-/media/files/news/press-release/pr1715mineralspricing.pdf.json)

---

### Introduction, mandate, and purpose
- Report prepared in the framework of the Platform for Collaboration on Tax (the “PCT”) by the OECD, with cooperation and input of the IMF, WBG and UN.
- Responds to the November 2014 request from the G20 Development Working Group to study feasibility of addressing information gaps on prices of natural minerals sold in an intermediate form (e.g., mineral concentrate).
- Scope: sector-specific focus on mineral products and markets (excludes hydrocarbons or agriculture).
- Practical objective: assist developing countries to improve understanding of how mineral products are priced to inform transfer pricing analysis of MNE income; build industry-specific knowledge for revenue authorities; complement sector-specific policy and administrative responses and tailored technical assistance.

### Domestic resource mobilisation and BEPS risks
- Mining and mineral product sales contribute to income growth, foreign exchange earnings and employment; sales prices are a crucial determinant of potential revenue where corporate income taxes (CIT) and ad valorem royalties are used.
- BEPS risks from cross-border intra-group product transactions:
  - MNEs can shift revenue and profits offshore by selling mineral products to related entities abroad at prices below equivalent sales to unrelated parties.
  - Companies may mis-report the value of product shipments, amounting to outright tax evasion.
- Capacity and information constraints in many mineral-exporting developing countries heighten revenue risks:
  - Revenue authorities may lack qualified staff, face difficulty testing claims of uniqueness, and struggle to perform transfer pricing comparability analysis.
  - Authorities may not know what information they need or where to find it; taxpayers may place information offshore.
  - Market opacity and transaction rarity (e.g., rare earth elements) can make comparables and international reference prices almost impossible to find.

### Box 1 — Potential Revenue Impact: Example from Copper Sales (OECD calculations)
- Scenario assumptions:
  - Cargo: 20,000 metric tonne shipment of copper concentrate exported from a developing country.
  - Frequency: 50 shipments per year.
  - Concentrate content: 31% copper by weight and 4 grams of gold per tonne.
  - Adjustments to gross value of cargo for losses during smelting: 1 percentage point of copper, 1 gram of gold.
  - Production cost: $1.70 per pound of copper.
  - Royalty rates: copper – 3.5% of copper value; gold – 5% of gold value.
  - CIT rate: 30%.
- Reported figures (all figures in $m):
  - Scenario headings: Copper Concentrate Shipment Market Price | 10% Under-priced Copper | Copper under-priced, no gold declared
  - Gross Value of Cargo FOB [A]: 39.5 | 35.1 | 32.7
  - Production Costs [B]: 22.5 | 22.5 | 22.5
  - Royalty [C]: 1.7 | 1.5 | 1.4
  - CIT Base [A-B-C]: 15.4 | 11.1 | 8.8
  - Company Tax Payable [D]: 4.6 | 3.3 | 2.6
  - Total Revenue per shipment [C+D]: 6.3 | 4.8 | 4.0
  - Potential Revenue Loss Per Shipment: — | -1.4 | -2.2
  - Potential Annual Revenue Loss: — | -71.4 | -112.3
- Notes: OECD calculations based on price data from World Bank Group (Pink Sheets), Cost data from Thompson Reuters; assumes comparable functions, assets and risks across parties.

### Methodology: 6-step systematic process for transfer pricing (TP) analysis
- Step 1: Identify the type of mine and production methods (questions on mine type, ore, products, verification, beneficiation, location, local similarities, involved entities and functions).
- Step 2: Identify the mineral products coming from the mine (quantities, tolling arrangements, transport/export, related party purchasers, routine sales to independents).
- Step 3: Understand the price drivers and international trading mechanisms (market scope, concentration, physical attribute adjustments, exchange trading, delivery/location effects, contract duration).
- Step 4: Understand the economic context (identify controlled transactions, obtain transactional documentation, assess unique production processes and asset purchases from related parties).
- Step 5: Identify data and other information to assist review (public/purchase data, reliability, need for adjustments, cost, usability, revenue at risk).
- Step 6: Devise a way forward when information gaps exist (alternate sources, methodologies, dispute resilience, investment cost/time, legal powers, international assistance, information exchange, taxpayer documentation).

### Wider issues affecting mineral pricing and taxation
- Royalties vs CIT:
  - Royalties typically applied at early transformation stages (e.g., “mine gate”); CIT usually applied to revenue from product sales or transfer of ownership; consistency between prices used for royalties and CIT is likely when taxing points align.
  - Comparable Uncontrolled Price method commonly appropriate for commodity transfers between related parties.
- Financing arrangements — “Metals Streaming”:
  - Streaming: Mine Co receives upfront finance (example: $100 million) in exchange for rights to purchase percentages of future metal production at deep discount to spot prices.
  - Streaming reduces tax bases where fiscal settings use sales revenue (ad valorem royalties and CIT) and can shift profits offshore.
  - Streaming agreements pose debt/equity characterization issues, hybrid mismatch risks, and challenges when participants locate agreements in low-tax jurisdictions.
  - Possible policy responses include controlled foreign corporation rules and reference to OECD hybrid mismatches work (Action 2 - 2015 Final Report).

### Case study highlights and industry context (selected minerals)
- Copper:
  - Copper ore at mining stage: typically 1-2 per cent by mass or less.
  - Many developing countries export copper as a concentrate, typically containing around 30 percent copper following initial beneficiation.
  - Some mines recover 85-95 percent of copper in the ore during concentration.
  - Dried concentrate composition example: approximately 20-30 percent copper by mass, around 30 per cent iron, 30 per cent sulphur, remainder including small amounts of gold, silver, and unwanted elements such as arsenic and mercury.
- Iron ore:
  - High-grade ores: approximately 50 to 65 percent iron; magnetite up to 30 percent iron; taconite usually less than 30 percent iron.
  - Key exports: fines, lumps, concentrates, pellets and sinter feed.
- Thermal coal:
  - Used primarily for electricity generation; traded coals range approximately 3,400 kcal/kg to 6,700 kcal/kg.
  - International trade (2014): Total trade of thermal coal: 1.05 billion tonnes; Seaborne trade: around 945 million tonnes; International trade represented around 17 percent of total coal production.
  - Major exporters (2014): Indonesia: estimated 421 million tonnes; Australia: 196 mt; Russian Federation: 127 mt; Colombia: 85 mt; South Africa: 74 mt.
  - Major importers (2014): China: 219 mt; India: 175 mt; Japan: 137 mt; Republic of Korea: 96 mt; Chinese Taipei: 58 mt.
- Gold:
  - Mined both in own right and as a by-product; usually exported as unrefined doré bars for refining elsewhere.

### Copper — smelting/refining process and pricing mechanics
- Smelting/refining stages and purities:
  - Roast concentrate, furnace → “matte” (50–70 percent copper) → converter → “blister” copper (~99 percent) → casting → anodes (~99.4 percent) → electrolytic refining → cathodes (99.9 percent).
  - “Electrowinning” produces 23 percent copper cathodes in an earlier stage (contextual mention).
- Payable metals and reference pricing:
  - Payments based on percentage of contained metals valued by reference to LME, SHFE, COMEX; contracts often specify “LME Grade A Settlement Quotation price” averaged over a quotation period (e.g., average price during the third month after scheduled shipment).
  - Recovery adjustments: for ~30 percent copper concentrates, smelters typically pay for 96-97 per cent of the copper value (a 30% concentrate might be paid for around 29% copper); below 30 percent, payable percentage typically reduced by 1 unit (100 basis points); below 22 percent deduction increases to 1.1 percent (Boliden, 2008).
  - Payable precious metals: gold below 1 gram per dry tonne typically not paid; above 1 gram/tonne payment based on LBMA gold spot price with around 97.5 percent payable to account for recovery losses; silver typically no payment if less than 30 grams per dry tonne, above which around 90 percent payable.
- TC/RC, charges and penalties:
  - Treatment charges (TC) usually in USD per tonne of concentrate (example: the 2015 TC was around USD 107 per tonne).
  - Refining charges (RC) usually in USD cents per pound of payable copper (2015 RC text truncated in source).
  - Penalties for deleterious elements, excessive moisture, and “complex concentrates” may be applied; penalty TC may be reduced or dropped if smelters struggle to acquire needed concentrates.
- Contract provisions:
  - Price formula: value of payable metals less deductions and penalties (TC, RC, impurities, moisture); assay is essential; contracts allocate costs (insurance, sea freight, taxes), payment terms, and may embed commissions that reduce payable metals.
- Exchange and cathode premiums:
  - LME spot price published in USD per tonne; “Grade A” copper specification ~99.9935 percent pure.
  - Physical delivery from exchange warehouses is rare relative to volumes traded (2015 illustrative figures: 73,375 tonnes delivered from LME warehouses over four months of 2015; 373.4 million tonnes traded on the LME over the same period).
  - Premiums: suppliers offering faster physical delivery achieved around 1-2 percent premiums over LME cash price (2015 European market example).
- Indicative impurity tolerances and penalties (selected elements and thresholds):
  - Arsenic: For each %: 0.1 | Exceeding %: 0.2
  - Antimony: For each %: 0.01 | Exceeding %: 0.1
  - Bismuth: For each %: 0.01 | Exceeding %: 0.05
  - Lead: For each %: 1.0 | Exceeding %: 1.0
  - Nickel: For each %: 0.1 | Exceeding %: 0.5
  - Cobalt: For each %: 0.1 | Exceeding %: 0.5
  - Chlorine: For each %: 0.01 | Exceeding %: 0.05
  - Fluorine: For each %: 10 ppm | Exceeding %: 330 ppm
  - Mercury: For each %: 1 ppm | Exceeding %: 10 ppm
  - Zinc: For each %: 1.0 | Exceeding %: 3.0
  - Silica, Alumina, Magnesia: For each %: 1.0 | Exceeding %: 5.0
  - Notes: n.a. – not available; uranium problematic at high concentrations.

### Iron ore — products, benchmarks, and pricing adjustments
- Common products: fines, lumps, concentrates, pellets and sinter feed; concentrates traded but small proportion of international trade.
- Grade notes:
  - Concentration outputs typically around 57 to 65 percent iron.
  - Pelletisation produces pellets typically 65-70 percent iron.
- Benchmarking and indices:
  - Common benchmark: dry tonne of iron ore fines containing 62 percent iron delivered to Qingdao port.
  - Indices tracking 62 percent Fe: IODEX (Platts); Mysteel; Metal Bulletin; TSI (The Steel Index); Argus Steel Feedstocks; CIOPI.
  - Example: a shipment with 61 percent Fe adjusted by multiplying 62 percent price by 61/62 = 0.983.
  - Proportional adjustments apply within specified range; below 60 percent Fe and above 63.5 percent Fe adjustments are non-linear and more variable.
- Market structure and trade:
  - China represented 55.8 percent of apparent iron ore consumption in 2012; Australia and Brazil comprise around 78 percent of China’s iron ore imports.
  - Structural change: pre-2010 annual contract pricing moved to quarterly/monthly and increased use of spot and index-based pricing since 2010.
- Contract metrics and conversions (illustrative example):
  - Contract volume: 50,000 tonnes of concentrate with 64 percent iron.
  - Contract price: 70.31 c/mtu.
  - Conversion: 0.7031 * 64 = $45/tonne.
  - Moisture adjustment: if shipment had 8 percent moisture, price adjusted to dry tonne as $45 * 0.92 = $41.4 per dry tonne.
- Size/form, impurities, and delivery:
  - Lump/pellet premiums relative to fines vary over time; impurities (silica, alumina, phosphorus, sulphur) and “loss on ignition” affect price via assays and negotiated adjustments.
  - Published prices often quoted on CFR Chinese ports; revenue authorities must adjust for delivery terms using netbacks.

### Thermal coal — energy content, indices, and contract mechanics
- Primary price determinant: energy content (kcal/kg or BTU/lb); traded coals range approximately 3,400 kcal/kg to 6,700 kcal/kg.
- Benchmarks and indices:
  - API2: imported coal to North West Europe (6000 kcal/kg NAR).
  - API4: Richards Bay (6000 kcal/kg NAR).
  - API6: Newcastle (6000 kcal/kg).
  - Argus ICI1-ICI5: Indonesian exports (3000 to 6200 kcal/kg NAR).
  - CAPP: spot price for eastern USA.
- Moisture and impurities:
  - Example contract: Total moisture specified at 13 percent; penalty USD 0.20/tonne for each 0.1 percent above 13 percent; rejection level: 14 percent.
  - Key impurity penalties: ash and sulphur; ash increases transport/handling and disposal costs; sulphur causes emissions and corrosion risks.
- Transaction types and durations:
  - International thermal coal trade dominated by spot transactions; fixed-price contracts typically shorter, generally not exceeding 12 months.
- Units and conversions:
  - Metric tonne = 1,000 kilograms.
  - Short ton (USA) = 2,000 pounds ≈ around 0.907 metric tonnes.
  - 1 BTU/lb = 0.556 Kcal/kg; NAR ≈ GAR minus 260 kcal/kg.

### Gold — refining, payable metals, and transaction mechanics
- Refining mechanics:
  - Doré deposited into customer’s refinery account; refinery assays bar, provides outturn report (quantities of gold and silver, quoted refining cost, purchase price).
  - Pricing to miner based on payable metals less retention fees, refining charges, and other fees/taxes.
- Reference prices and adjustments:
  - Reference most often LBMA “LBMA Gold Price” (AM and PM electronic auctions) quoted per fine troy ounce in USD, EUR and GBP.
  - Refineries may use LBMA price for day bar received or adjust spot price to provide commission; some transactions use an average over a quotation period (rare).
  - Location adjustments: e.g., Loco Perth discount approximately US 30-40 cents/ounce to Loco London spot price.
- Retention and refining charges:
  - Retention fee for losses during refining: around 0.1 percent for gold and 1 percent for silver (based on discussions with refineries); not published and varies across refineries.
  - Refining charges estimated to be in the order of USD 1-3 per gross ounce; set per gross ounce and negotiated (higher quantities and longer-term arrangements attract lower charges).
- Loco swaps:
  - Mechanism to transfer gold location without physical transport via offsetting purchase/sale in different locations (example: loco London $1002/oz vs loco Hong Kong $1000/oz discount of $2/oz; miner pays $200 for 100 oz swap).
- Measurement:
  - Trading unit for gold is fine troy ounces; a troy ounce ≈ 31.1 grams.

### Annex highlights — commercial practices, incoterms, shipping, payments, and data sources
- Offtake agreements and blending:
  - Offtake agreements often set pricing formulas and can cause shipments to occur at premiums/discounts to spot; discounts may be used to secure finance or stable buyers.
  - Blending used to create marketable products; blending decisions driven by customer requirements, smelter constraints, environmental/import regulations (e.g., China prohibited copper concentrates with arsenic above 0.5 percent, Platts, 2014).
- Common Incoterms for sea transport: FOB, CFR, CIF, and “Ex works”; bulk freight vs break bulk distinctions.
- Payment methods: at sight, letter of credit, cash against documents, documents against acceptance (D/A).
- Documents: Bill of Lading (B/L), Notice of Readiness (NOR).
- Data sources and pricing services (selected highlights):
  - Copper: ICSG, CRU (Copper Concentrates Market Outlook), Asian Metal, Platts Metals Daily, Shanghai Metals Market (SMM), Metal Bulletin Research.
  - Gold: LBMA, Wall Street Journal, World Bank “Pink Sheets”, Platts Metals Daily.
  - Iron ore: Minerals Valuation Service (MVS), UNCTAD Iron Ore Market Report and Statistics, Argus Media, The Steel Index (TSI), Metal Bulletin Research, Platts.
  - Thermal coal: Argus Coal Daily International, Platts Coal Trader International, GlobalCOAL SCoTA, IEA Medium Term Coal Market Report 2016.

### Conclusions, policy implications, and recommended actions
- Applying transfer pricing rules to commodity transactions is complex for revenue authorities; effective application requires alignment across legislation, processes, information access, and sector knowledge.
- Report fills an information gap and supports developing countries; more work is needed and some developing countries are already applying the methodology and drafting case studies.
- Possible further actions:
  - Practical industry knowledge: additional case studies on other minerals, oil and gas products, and potentially agricultural markets; OECD to continue work on rough diamond valuation and bauxite (planned delivery in 2017) and potential rare earth study in 2018; expanded studies including freight markets and costs of key mining/smelting/refining inputs.
  - Wider issues: implement effective transfer pricing rules, examine remuneration and role of trading/logistics entities of multinationals, study price risk management (hedging) between related parties, encourage greater market price transparency for opaque minerals, and continue capacity building and training at country and regional levels.
- Companies have reacted positively to case studies as they assist governments and companies in moving from structural discussions to treatment under transfer pricing rules.

*Source: IMF/OECD/WBG/UN PCT report introduction and selected boxes, case studies, annexes (pr1715mineralspricing).*

### Introduction............................................................................................................

### Introduction

### Background and mandate
- Report prepared in the framework of the Platform for Collaboration on Tax (the “PCT”) by the OECD, with cooperation and input of the IMF, WBG and UN.
- Responds to the November 2014 request from the G20 Development Working Group for the OECD to: “...commence a study on the feasibility of addressing the information gap on prices of some natural minerals sold in an intermediate form, e.g. mineral concentrate...”
- Scope: sector-specific focus on mineral products and markets (excludes hydrocarbons or agriculture).
- Rationale: focused examination of unique characteristics of extraction, transformation and sale of mineral products to support sector-specific policy, administrative responses, and tailored country-level technical assistance (including transfer pricing guidance).

### Domestic resource mobilisation from mining — key points
- Mining and mineral product sales contribute to income growth, foreign exchange earnings and employment.
- Governments rely on mineral product sales to generate revenue to boost living standards and help achieve the Sustainable Development Goals (SDGs).
- Sales prices are a crucial determinant of potential revenue where corporate income taxes (CIT) and ad valorem royalties are used.

### BEPS risks from cross-border intra-group product transactions
- Cross-border sale and purchase of mineral products between related parties creates Base Erosion and Profit Shifting (BEPS) risks by separating substantive economic activity from where profit is reported and taxes are paid.
- A straightforward BEPS mechanism: MNEs sell mineral products to a related entity abroad at prices below equivalent sales to unrelated parties, shifting sales revenue and profits offshore to lower-tax jurisdictions.
- Companies may also engage in outright tax evasion by mis-reporting the value of product shipments.

### Box 1 — Potential Revenue Impact: Example from Copper Sales (OECD calculations)
- Scenario assumptions and parameter values (as reported):
  - Cargo: 20,000 metric tonne shipment of copper concentrate exported from a developing country.
  - Frequency: 50 shipments per year.
  - Concentrate content: 31% copper by weight and 4 grams of gold per tonne.
  - Adjustments to gross value of cargo for losses during smelting: 1 percentage point of copper, 1 gram of gold.
  - Production cost: $1.70 per pound of copper.
  - Royalty rates: copper – 3.5% of copper value; gold – 5% of gold value.
  - CIT rate: 30%.
- Reported table (all figures in $m):
  - Scenario headings: Copper Concentrate Shipment Market Price | 10% Under-priced Copper | Copper under-priced, no gold declared
  - Gross Value of Cargo FOB [A]: 39.5 | 35.1 | 32.7
  - Production Costs [B]: 22.5 | 22.5 | 22.5
  - Royalty [C]: 1.7 | 1.5 | 1.4
  - CIT Base [A-B-C]: 15.4 | 11.1 | 8.8
  - Company Tax Payable [D]: 4.6 | 3.3 | 2.6
  - Total Revenue per shipment [C+D]: 6.3 | 4.8 | 4.0
  - Potential Revenue Loss Per Shipment: — | -1.4 | -2.2
  - Potential Annual Revenue Loss: — | -71.4 | -112.3
- Sources and notes: OECD calculations based on price data from World Bank Group (Pink Sheets), Cost data from Thompson Reuters. The example assumes comparable functions, assets and risks across parties.

### Challenges for mineral-exporting developing countries
- Limited sector knowledge and administrative capability:
  - Revenue authorities may lack sufficient qualified staff to apply tax rules and may be uncertain how particular mineral products are priced.
  - Authorities may struggle to test claims that particular product shipments are ‘unique’ or to carry out transfer pricing comparability analysis and adjustments.
  - Need for capacity building where a country has a newly developed mining sector or limited transfer pricing experience.
- Information constraints:
  - Authorities may not know what information they need or where to find it.
  - Limited resources to search for comparable uncontrolled transactions or to purchase information.
  - Taxpayers may place information offshore or otherwise make it difficult or expensive to obtain.
- Market opacity and rarity:
  - For some mineral products (e.g., rare earth elements), transactions may be infrequent and opaque, making international reference prices or comparables almost impossible to find.

### Report purpose and approach
- Practical objective: assist developing countries to improve understanding of how mineral products are priced to inform transfer pricing analysis of MNE income.
- Emphasis on building industry-specific knowledge that revenue authorities can extend and apply to domestic mines.
- Work complements sector-specific policy and administrative responses (including new transfer pricing guidance) and tailored technical assistance. 

*Source: IMF/OECD/WBG/UN PCT report introduction (press release PDF).*

### Box 2. Comprehensive Tools and Information are Needed for TP Analysis

### Box 2. Comprehensive Tools and Information are Needed for TP Analysis

### Overview: purpose and scope
- Transfer pricing (TP) rules for mineral sales require specialised officials and information from multiple sources to (i) assess which transactions pose significant TP risks and (ii) analyse transactions in detail.
- TP adjustments may be needed where related party transactions are inconsistent with comparable arm’s length transactions.
- Addressing pricing risks requires support across legislation, processes, access to information and data, and sector-specific knowledge.
- This report is part of a suite of tools and activities (including the toolkit on comparability analysis and information exchange initiatives) and builds on tailored, country-specific assistance provided through IOs and other technical assistance providers.

### Report structure and outputs
- The report:
  - Outlines a systematic process to help developing countries map the transformation chain for a particular mineral, identify key traded products, and establish common pricing practices.
  - Demonstrates the process via OECD case studies on copper, gold, thermal coal and iron ore.
  - Provides for each mineral a list of data sources available to revenue authorities.
  - Concludes with comments on possible future directions and where additional related work could help meet the needs of developing countries.

### Methodology: 6-step systematic process
- The OECD process has 6 steps which sequentially help officials understand the profile and structure of the domestic mining industry, the mines in operation and what they are producing. As mineral product knowledge increases, information asymmetries should narrow and market pricing information can be used more effectively.
- Different revenue authorities will be at different stages of expertise, affecting time needed for each step.

Step 1: Identify the type of mine and production methods
- Purpose: understand extraction and transformation methods, extent of local value adding, and machinery/equipment used.
- Key focus questions:
  - What kind of mine is it?
  - What type of ore is the mine extracting?
  - What products can be produced from the ore?
  - Who verifies the products produced? (for example, is testing/assay reliable?)
  - What method of transformation and beneficiation is used to produce those products?
  - Where does this take place?
  - Does this mine have similarities with other mines domestically? (These similarities might be in, for example, inputs used; products produced; transportation methods employed; and/or customers.)
  - What entities are involved in the transformation and what are their key functions?

Step 2: Identify the mineral products coming from the mine
- Purpose: identify exact products (e.g., iron ore concentrate or “direct shipping ore”), by-products, and whether processing facilities are used by third parties under tolling arrangements.
- Key focus questions:
  - What product quantities are being produced per month/year?
  - Is the mine’s beneficiation equipment used to process ores from other mines (eg on a tolling basis)?
  - Who is checking this production and is the check reliable?
  - How will those products be transported when they are sold?
  - How will they be exported?
  - Who will the mining company sell the product to? In particular, are they a related party? If so, where are they located?
  - Is this product routinely sold to independent parties (i.e., at arm’s length)? If so, under what terms?

Step 3: Understand the price drivers for those products and how they are traded internationally
- Purpose: understand customers, product features, and market structure.
- Key focus questions:
  - What are the key features of the product market? For example, is it a global market, or regional?
  - What are the market conditions and concentration of buyers and sellers? Are they changing?
  - What adjustments are made to account for physical attributes, and which have the largest potential impact on price?
  - Is the product traded on an open exchange? (for example, the London Metal Exchange?) If so, on what terms?
  - Are there other physical features that can affect price, such as the size of the ore pieces?
  - Does the location of the product or delivery date materially affect the price?
  - Is the transaction a one-off or part of a longer-term agreement between the parties?

Step 4: Understand the economic context to the transactions
- Purpose: identify related party sales and the functions, assets and risks of related parties; understand the MNE economic model and contractual terms.
- Key focus questions:
  - Has the taxpayer entered into a controlled transaction at this point in the process?
  - If so, obtain details of who sold to whom, where they are tax resident, documentation of the transactions including composition of the traded product, transportation details, payment details.
  - Has some of the product been sold to a third party? If so: who was it sold to and where are they tax resident? What documentation exists (eg sales contract) that describes key terms including composition, reference prices used, transportation and payment details?
  - Does the taxpayer have a unique production process or are all the processes the same? Are they publicly known?
  - Have assets (related to the production process), and mainly, valuable unique assets been purchased by the taxpayer from a related party?

Step 5: Identify data and other information that could assist in reviewing the transaction
- Purpose: locate publications, databases and other information to establish whether MNE’s transactions align with common industry approaches and trading at particular times.
- Key focus questions:
  - Is there data that could be used to compare the transaction (either publicly available or available for purchase)?
  - How reliable is that information? (for example, would it be accepted as evidence in a dispute in a court? Do other mining companies use this data?)
  - Would the information need to be adjusted to ensure it is comparable with the transaction under review? (for example, to adjust for geographical or quality differences)? Can this be done reliably?
  - How much does it cost to purchase the information?
  - Is the information easy to use? If not, is support provided to use the data?
  - What revenue is at risk? How does this compare to other revenue risks?

Step 6: Devise a way forward when there are information gaps
- Purpose: identify alternate sources and appropriate TP methods; consider costs, timeliness, dispute resilience, and international assistance.
- Key focus questions:
  - Are there alternate sources of information? (for example, could information on smelting or refining costs be obtained from elsewhere?)
  - Are there commonly used methodologies to derive a price from another product?
  - Would these withstand dispute resolution processes?
  - Is it worth investing in additional data or consultancy expertise? If so, how much will this cost? How long will it take to receive the information?
  - What legal powers are available if the taxpayer refuses to provide information?
  - Which other countries might be able to assist?
  - Can informal country networks help reinforce understanding of key pricing practices for that product?
  - Can information be obtained through formal information exchange mechanisms?
  - Do taxpayer documentation requirements enable satisfactory review of transactions?

### Wider issues related to mineral product pricing
- Relationship between prices under Corporate Income Tax (CIT) and for royalties:
  - Royalties are typically applied to products at early stages of the transformation chain (for example, at the point the minerals leave the mine site — the “mine gate”) to avoid taxing value-adding that is mainly subject to CIT.
  - CIT is usually applied to revenue from product sales or when ownership is transferred; within MNEs this can occur at any point on the transformation chain.
  - When international transfer pricing standards are used, wider contextual and business factors (economic circumstances, functions, assets and risks, contractual terms) are considered in computing an arm’s length price for CIT.
  - The Comparable Uncontrolled Price method is commonly appropriate for establishing arm’s length prices for commodity transfers between related parties; when the taxing point is the same for royalty and CIT, high consistency between prices used for royalties and CIT is likely.
  - Some countries simplify arrangements by defining pricing mechanisms for royalties or CIT (via legislation or Advance Pricing Agreements).

- Financing arrangements affecting transacted product prices — “Metals Streaming”
  - Mine construction financing tied to subsequent mine production (streaming) has become increasingly common and can reduce tax bases and transfer profits offshore because mines sell portions of production or by-products at severely discounted prices.
  - Example (Figure note): Finance Co provides Mine Co $100 million for construction of Mine Co’s copper mine, in exchange for the right to purchase a percentage of metal by-products. The purchase price is set at a deep discount to prevailing spot prices. Once production begins, Mine Co sells the agreed quantity to Finance Co at the agreed price, or at the spot price if it is lower (Gowlings, 2015). Finance Co then sells metals at prevailing spot prices and recovers its investment.
  - Streaming agreements can be between unrelated or related parties and typically place significant risks on the mine (risk of not being brought to production; cost over-runs), and often apply sales commitments over the life of the mine including additional discoveries.
  - Streaming reduces tax bases where fiscal settings use sales revenue (eg ad valorem royalties and CIT). Because financing provided is linked to discounted prices, mines have incentives to agree to lower fixed prices to increase up-front finance.
  - Streaming agreements pose challenges due to debt and equity characteristics, potential hybrid mismatch tax issues, and the possibility that participants locate the agreement in low-tax jurisdictions where relationships are difficult to establish.
  - Possible policy responses mentioned include controlled foreign corporation rules and reference to the OECD work on hybrid mismatches (Action 2 - 2015 Final Report).

### Mineral case studies and industry context (selected highlights)
- The OECD prepared case studies on copper, iron ore, thermal coal and gold focused on medium and large-scale mines, predominantly operated by MNEs.
- Copper:
  - Copper ore copper content at mining stage: typically 1-2 per cent by mass or less.
  - Many developing countries export copper as a concentrate, typically containing around 30 percent copper following initial beneficiation.
  - Some mines recover 85-95 percent of copper in the ore during concentration processes.
  - Dried concentrate composition example: approximately 20-30 percent copper by mass, around 30 per cent iron, 30 per cent sulphur, with remainder including small amounts of gold, silver, and unwanted elements such as arsenic and mercury.
  - Exported copper concentrates are transported by sea as a bulk commodity, either in drums, packages, or as loose powder.
- Iron ore:
  - High-grade ores: approximately 50 to 65 percent iron (primarily hematite).
  - Low-grade ores: magnetite (contains up to 30 percent iron) and taconite (usually less than 30 percent iron).
  - Key exports: fines, lumps, concentrates, pellets and sinter feed.
- Thermal coal:
  - Used primarily as an energy source for electricity generation; varies by grade based on energy content and impurity levels.
  - Can be blended to achieve particular energy content; sold to final users or via traders.
- Gold:
  - Mined both in own right and as a by-product; usually exported from medium and large-scale mines as unrefined doré bars for refining elsewhere.

*Source: Box 2. Comprehensive Tools and Information are Needed for TP Analysis (pr1715mineralspricing).*

### 2.5 centimetres, forming 99.9

### pr1715mineralspricing - 2.5 centimetres, forming 99.9

### Copper smelting and refining process
- Concentrate may be initially roasted to remove sulphur and moisture.
- Concentrate is combined with silica sand and limestone and transferred to a furnace; as the materials melt:
  - heavier copper sinks to the bottom of the furnace;
  - silica floats and is poured off as slag.
- After the furnace process, copper is in “matte” stage with copper concentration between 50 and 70 percent.
- Matte is typically transferred as a molten liquid to a converter or poured into ingots and cooled for transfer to a separate facility.
- In the converter:
  - more silica is added to the matte;
  - air is blown through the furnace to separate copper from another slag containing the iron;
  - resulting product is “blister” copper, typically around 99 percent pure, still containing small impurities including oxygen, sulphur and iron.
- Blister copper may be cooled and shaped into ingots or carried directly to an anode furnace for casting.
- During casting, natural gas is blown into the melt to burn off excess oxygen.
- At end of casting, molten copper of approximately 99.4 percent purity is poured into moulds and cooled to form anodes.
- Refining (electrolytic process):
  - anodes are placed in tanks with a sulphuric acid solution and fine “starter” sheets of pure copper;
  - an electrical current causes anodes to dissolve and copper to attach to starter sheets, forming 99.9 percent pure copper cathodes;
  - precious metals do not dissolve and drop to the base of the refining cell as ‘anode slime’, which is collected and recovered through a leaching process.
- The process “electro winning” is identified as producing 23 percent copper cathodes in an earlier stage (contextual mention).

### Pricing practices — overview
- Copper products most commonly traded at arm’s length: copper concentrates and refined copper cathodes.
- Trade in copper ore is uneconomic because much of the ore material is gangue (i.e. commercially worthless).
- Blister and anode copper products are traded but markets are more opaque because transactions occur much less frequently.

### Copper concentrate market conditions (Box)
- Factors influencing whether a transaction reflects arm’s length pricing:
  - Customer identity: smelters/refiners and trading companies (stand-alone intermediaries or within corporate groups).
  - Nature of the transaction: short-term spot vs longer-term supply agreements; tolling arrangements where smelters process concentrate on behalf of mines without transferring ownership.
  - Market dynamics: demand-supply in concentrates market, upstream conditions (including copper mine production, availability of raw materials), downstream conditions (availability of refined copper and scrap).
  - Customer needs: smelters seek concentrates best suited to their facility, may blend clean and dirty concentrates; reliability of supply and reputation of mines matter to smelters aiming for peak capacity.

### Components of a concentrate sale agreement
- Agreed price typically based on a formula: sum of value of contained metals (“payable metals”) less deductions and penalties.
- Typical contract provisions:
  - calculate the value of payable metals;
  - calculate deductions and penalties (typically, treatment and refining charges, and penalties for impurities and/or penalties for excessive moisture where needed);
  - outline other concessions such as “price participation”;
  - allocate related costs such as insurance, sea freight, taxes and duties;
  - outline payment terms.
- Assay of the concentrate is essential for pricing calculations; deviations from standard specifications lead to more adjustments.
- Note: Contracts between related parties may also contain commissions for sale to third parties; such commissions may be embedded by directly reducing the payable metals amount.

### Payable metals — copper reference price and losses
- Payment based on percentage of copper present in the concentrate valued by referencing refined copper price on major commodity exchanges: London Metal Exchange (LME); Shanghai Futures Exchange (SHFE); Commodity Exchange Division of the New York Mercantile Exchange (COMEX).
- Example: contracts typically specify the “LME Grade A Settlement Quotation price” as the reference price, averaged over a quotation period (e.g., average price during the third month after the month of scheduled shipment).
- For concentrates, contracts usually refer mechanically to exchange price; for products later in the value chain, physical location of the metal is more important.
- Recovery adjustments:
  - For common concentrate grades around 30 percent copper, payments typically align with actual percentage but adjusted for recovery losses.
  - For concentrates around 30 percent copper, smelters typically pay for 96-97 per cent of the value of the copper present, so a concentrate with 30 percent copper might actually be paid for around 29 percent copper.
  - Below 30 percent, typically the payable percentage is reduced by 1 unit (100 basis points).
  - Below 22 percent, the deduction increases to 1.1 percent (Boliden, 2008).
  - If percentage exceeds 30 percent, smelter might reduce the recovery adjustment.
  - Example regional variation: for a concentrate with copper above 32 percent, smelters would pay 96.65 percent, rising to 96.75 percent for copper above 38 percent (company observation).
- Payable precious metals:
  - Gold: quantities below 1 gram per dry tonne typically do not receive payment; for gold above 1 gram per tonne, payment typically based on LBMA gold spot price; only around 97.5 percent of the material is paid for to account for recovery losses.
  - Silver: typically no payment if less than 30 grams per dry tonne; above this, weight multiplied by LBMA spot silver price; sellers typically receive around 90 percent of the value of the silver to account for recovery losses.
  - Quotation period for precious metals may match the copper quotation period.
- Note: Australian state of Queensland accepts a deduction of 1 gram of gold per tonne of concentrate when applying royalties, with the adjusted quantity then reduced further by 10 percent. No adjustment is made for gold sold in any other form.

### Charges and penalties — treatment and refining (TC and RC)
- Treatment charges (TC) usually expressed in US dollars per tonne of concentrate.
  - Example: the 2015 TC was around USD 107 per tonne.
  - TCs may increase for concentrates with copper content above 40 percent, depending on market conditions.
- Refining charges (RC) usually expressed in USD cents per pound of payable copper in the concentrate.
  - Example: 2015 RC is expected to be USD (text truncated in source).
- Spot TC/RC formation: mines producing more concentrate than expected may sell on spot markets to independent traders or to smelters with excess capacity.
- Under longer-term contracts, annual TC/RCs are commonly negotiated annually between large global mining companies and major Asian refineries; negotiations typically conclude by December each year and terms are frequently incorporated into similar supply arrangements between other parties.

*IMF — pr1715mineralspricing - 2.5 centimetres, forming 99.9*

### 10.7 cents/pound (USD 23.6 cents per kg).

### pr1715mineralspricing - 10.7 cents/pound (USD 23.6 cents per kg).

### Charges and Penalties – Deleterious Elements
- Concentrate purchasers seek deductions from payable metals for removal of deleterious elements that exceed levels commonly found in concentrates.
- Penalties may be applied for concentrates with excessive moisture.
- Typical penalty structure:
  - Penalised as a USD per tonne amount for incremental percentages above a specified threshold.
  - Excess concentrations can lead to concentrate rejection if they:
    - exceed environmental or safety limits;
    - are unreasonably difficult (and therefore expensive) to treat;
    - are expensive to dispose of (such as mercury).
- A penalty TC for “complex concentrates” may be imposed depending on market conditions; this fee may be reduced or dropped if smelters struggle to acquire needed concentrates.

### Other contractual terms affecting pricing
- Historical and negotiable terms:
  - “Price participation” clauses (used until around 2007) allowed smelters to share in higher metals prices.
- Logistics and contractual delivery:
  - Costs of insuring and transporting concentrate to buyer affect final price.
  - Concentrates are sold using several different incoterms depending on bargaining power.

### Blister and Anode Copper
- Blister copper trading is less common; pricing practices are more opaque.
- Blister and anode products often sold from smelters to refineries, frequently within corporate groups; less pricing data available.
- Pricing approach:
  - Based on value of payable metals less charges and deductions.
  - At blister stage product is around 98 to 99 percent copper; sellers paid based on percentage of copper present.
  - Payments made for precious metals with reductions for expected process losses.
  - Refining charges applied for impurity removal; these are lower than RC applied to concentrates.
  - Blister and anode copper typically sold on a CIF basis.

### Refined Copper Cathodes
- Refined copper cathodes are globally traded on exchanges such as the LME and COMEX.
- LME spot price features:
  - Published in USD per tonne of copper, along with corresponding exchange rates.
  - Based on the last cash offer price for a copper lot to be settled in two business days.
  - “Grade A” copper conforms to a chemical composition standard (essentially 99.9935 percent pure copper).
- Price-setting attributes for cathodes include:
  - Physical characteristics (compliance with chemical composition standards);
  - Whether metal is within or outside official warehousing systems of major exchanges;
  - Location of the metal;
  - Delivery terms, particularly delivery speed.
- Delivery-related costs typically include rental charges for warehouse space, load-out charges, and delivery costs to specified location.

### Box: Commodity Exchange Prices and Cathode Price Premiums
- Exchange prices (e.g., LME spot price) are commonly used as reference to calculate payable copper earlier in the chain, but may not fully capture transaction-specific terms.
- Exchange prices reference a warrant for a standardised lot of metal located in an exchange-approved warehouse.
  - Example: copper warrant located at a specific warehouse (e.g., Rotterdam).
- Physical delivery from exchange warehouses is rare relative to volumes traded (illustrative figures from 2015):
  - 73,375 tonnes delivered from LME warehouses over four months of 2015;
  - 373.4 million tonnes traded on the LME over the same period.
- Price premiums:
  - Cathode manufacturers may obtain premiums above exchange prices by offering faster physical delivery.
  - Premiums are typically enjoyed by all sellers offering prompt delivery to that market, though extent varies by seller strategy.
  - Example: In 2015, suppliers to European market achieved premiums of around 1-2 percent over the LME cash price by offering prompt delivery (usually 8-10 working days).
- Whether a premium applies in a related party transaction depends on:
  - Physical location of the metal relative to buyer;
  - Delivery terms available from other suppliers;
  - Example: Australian-shipped cathodes to Europe could attract a European price premium if delivery time matches European suppliers (all else equal).
- Within official warehousing systems, premiums may be paid by purchasers taking physical delivery when waiting times rise; buyers may purchase a warrant higher in the delivery queue, paying a premium.

### Additional Information — Copper: Impurities in Copper Concentrates (indicative tolerances)
- Penalty elements, reasons, and indicative tolerance thresholds (“For each %” / “Exceeding %” where provided):
  - Arsenic
    - Reason: Reduces conductivity; raises recrystallization temperature; causes cracking at grain boundaries; known human carcinogen; expensive to dispose of.
    - For each %: 0.1
    - Exceeding %: 0.2
  - Antimony
    - Reason: Reduces cathode conductivity, annealability, drawability; possible human carcinogen.
    - For each %: 0.01
    - Exceeding %: 0.1
  - Bismuth
    - Reason: Causes cracking of copper rods; poor drawability at very low concentrations; increases work-hardening as concentration increases.
    - For each %: 0.01
    - Exceeding %: 0.05
  - Selenium
    - Reason: Makes cathode copper more prone to cracking during wire drawing; toxic at higher concentrations; combines with copper during refining, reducing copper recovered.
    - For each %: (no numeric entry provided)
    - Exceeding %: (no numeric entry provided)
  - Tellurium
    - Reason: Increases brittleness, causing rod cracking and poor drawability; combines with copper during electrolytic refining, reducing copper recovered.
    - For each %: (no numeric entry provided)
    - Exceeding %: (no numeric entry provided)
  - Lead
    - Reason: Toxic to humans, requiring environmental mitigation measures.
    - For each %: 1.0
    - Exceeding %: 1.0
  - Nickel
    - Reason: Decreases solubility of copper in electrolyte during refining; must be removed; human carcinogen; recovered nickel sulphate can be sold.
    - For each %: 0.1
    - Exceeding %: 0.5
  - Cobalt
    - Reason: Toxic at higher concentrations; can be recovered and sold if concentrations are high enough.
    - For each %: 0.1
    - Exceeding %: 0.5
  - Chlorine
    - Reason: Causes corrosion in smelter components if it condenses as hydrochloric acid; can require environmental mitigation.
    - For each %: 0.01
    - Exceeding %: 0.05
  - Fluorine
    - Reason: Forms hydrofluoric acid if mixed with water, corrodes and causes health problems; smelters reluctant to accept high fluorine concentrates or charge significant handling penalties.
    - For each %: 10 ppm
    - Exceeding %: 330 ppm
  - Cadmium
    - Reason: Toxic heavy metal classed as a carcinogen; requires mitigation measures.
    - For each %: n.a.
    - Exceeding %: n.a.
  - Mercury
    - Reason: Highly toxic; raises waste disposal costs; can damage smelter equipment; can remain in smelter gases requiring cooling below zero degrees Celsius to reduce concentration; removal techniques add capital and operating costs; requires disposal.
    - For each %: 1 ppm
    - Exceeding %: 10 ppm
  - Zinc
    - Reason: Increases slag viscosity in high concentrations, increasing loss of copper.
    - For each %: 1.0
    - Exceeding %: 3.0
  - Silica, Alumina, Magnesia
    - Reason: Increase smelter melting point in high percentages, requiring higher operating temperatures (more energy) to limit lost copper.
    - For each %: 1.0
    - Exceeding %: 5.0
- Notes:
  - n.a. – not available.
  - Uranium is also a problem element at high concentrations, making the concentrate harder to sell.
- Source cited within content: C Fountain, The Whys And Wherefores Of Penalty Elements In Copper Concentrates.

### Case Study: Iron Ore — Mining, Products, and Pricing Practices
- Mining and initial beneficiation:
  - Most initial beneficiation produces three materials: a concentrate; a middling or very low-grade concentrate (reprocessed or stockpiled); and tailings.
  - High-grade ores such as hematite can be “direct shipping ores” (DSO) producing “lumps” (>5 millimetres) or “fines” (<5 millimetres).
  - Magnetite and lower-grade hematite require additional processing: magnetic separation and flotation.
- Concentration outputs:
  - Concentration processes create iron ore products typically around 57 to 65 percent iron.
  - Pelletisation produces pellets typically 65-70 percent iron with low levels of impurities.
- Iron ore product types and trade:
  - Most traded products: iron ore fines, followed by pellets and iron ore lumps.
  - Iron ore concentrates are traded but constitute a small proportion of international trade.
- Major consumers and market influence:
  - China represented 55.8 percent of apparent iron ore consumption in 2012, Japan 7.1 percent, India 6.2 percent.
  - Many pricing publications focus on transactions with delivery to Chinese ports as indicative of international market directions.
  - Australia and Brazil comprise around 78 percent of China’s iron ore imports.
- Structural change in pricing:
  - Prior to 2010, majority of contract prices set in annual negotiations between large suppliers and steelmakers.
  - From 2010, contracts moved toward quarterly or monthly terms; increased acceptance of a “spot” price.
  - Contracts have evolved further to widespread use of price indices.
- Electronic trading platforms:
  - Platforms such as GlobalORE and the China Beijing International Mining Exchange (CBMX) are increasingly used for standardised iron ore physical trades, though still small relative to total physical delivery transactions.
- Pricing determinants for iron ore products:
  - Fundamentally determined by prevailing and expected supply and demand from the steelmaking industry.
  - For particular products, price determined primarily by amount of iron (“fe”).
  - Other characteristics affecting price:
    - Physical form (fines, lumps, pellets) and suitability for steelmaking;
    - Impurities present;
    - Delivery and payment terms;
    - Duration of agreement and negotiating skills of parties (affect price at the margin).
- Iron ore price benchmarks:
  - Benchmarks often based on price of iron ore with 62 percent iron per dry metric tonne.
  - Indices tracking 62 percent iron products include:
    - IODEX (Platts);
    - Mysteel (Mysteel.com);
    - Metal Bulletin (Metal Bulletin Ltd);
    - TSI (The Steel Index);
    - Argus Steel Feedstocks (ICM, Argus Media ltd);
    - China Iron Ore Price Index (CIOPI, China Iron and Steel Association).
  - Contract terms usually refer to an index resembling the product and adjust the index price to account for physical differences between benchmark and actual product.

*Source: pr1715mineralspricing - 10.7 cents/pound (USD 23.6 cents per kg).*

### 63.5 percent is adjusted proportionately, based on the actual iron content (percentage) – so a

### pr1715mineralspricing - 63.5 percent is adjusted proportionately, based on the actual iron content (percentage) – so a

### Iron ore pricing benchmarks and grade adjustments
- Published benchmark commonly quoted: a dry tonne of iron ore fines containing 62 percent iron (“Fe”) delivered by sea to Qingdao port in northern China.
- Proportional adjustment example: a shipment with iron content of 61 percent would be adjusted proportionately to the benchmark 62 percent price.
  - That is, the 62 percent price would be discounted by multiplying it by 61/62, or 0.983.
- Proportional adjustments apply only to iron ore products with iron content within the specified range; below 60 percent iron and above 63.5 percent, adjustments are not linear and are more variable.
- Other grade benchmarks exist:
  - Higher-grade iron ore: 65 percent iron (prices naturally higher).
  - Lower-grade iron ore: 58 percent iron (prices lower).

- Market shares (2011-12): TSI referenced by around 70 percent of pricing, MBIO and IODEX around 12 percent each. TSI is now owned by Platts (McGraw Hill).

### Contract metrics, conversions, and an illustrative calculation
- Contract pricing metrics vary; some contracts price in US cents per metric tonne unit (c/mtu) of ferrous content (common for concentrates), requiring conversions to compare with published dry tonne prices.
- Example contract:
  - Contract volume: 50,000 tonnes of concentrate with 64 percent iron.
  - Contract price: 70.31 c/mtu.
  - Conversion to dollars and Fe adjustment: 0.7031 * 64 = $45/tonne.
  - Moisture adjustment example: if shipment had 8 percent moisture, price adjusted to dry tonne as $45 * 0.92 = $41.4 per dry tonne.
- Freight and transport:
  - For freight purposes, wet tonnes are the relevant metric since this is the weight that must be physically transported (ArcelorMittal, 2016).
  - Maritime safety regulations limit moisture content of iron ore products (IMO, 2009).

### Adjustments based on physical form and size
- Physical form affects price premiums or penalties; these can fluctuate over time:
  - Lump and pellet forms generally attract premiums relative to fines because they are suitable for immediate use in furnaces.
  - Premiums can vary seasonally (e.g., premium for shipments to China may increase in cold weather if local supplies are restricted).
- Common adjustments:
  - Fines: penalty for very small pieces (“superfines”) reflecting additional processing required.
  - Lumps: unusually large lumps may attract a smaller premium if they exceed a fixed percentage of the shipment (additional processing required).
  - Pellets: premiums above fines depending on pellet quality; pellets for direct reduction steelmaking usually attract greater premium than pellets for blast furnaces.
- Size-based adjustments are typically negotiated bilaterally; some published data on lump and pellet premiums exists.

### Impurities, penalties, and typical limits
- Key impurities affecting price: silica, alumina, phosphorous, sulphur, and “loss on ignition” (predominantly moisture).
- Contracts usually specify limits on impurities; adjustments made on the basis of assay results.
- Specific notes:
  - For alumina and silica, some market data exists on adjustments for each additional percentage point of impurity within certain ranges.
  - Low-alumina iron ore products (alumina below 4 percent) can have their own index price with a higher price than standard grades.
  - Moisture levels do not have a significant effect on prices for fines and lumps since they are priced per dry metric tonne; pellets typically have no more than 2 percent moisture and would rarely attract moisture penalties.
  - For other impurities, pricing adjustment information is difficult to find and terms are usually negotiated bilaterally.
- Operational and regulatory constraints encourage mines to produce products adhering to commonly traded impurity levels; where impurities materially exceed market norms, sellers may accept harsher penalties or blend/beneficiate the ore.

### Location, delivery timing, and contract duration effects
- Published prices often quoted at Chinese ports on CFR trade terms; revenue authorities must often adjust prices for different delivery terms using netbacks.
- Delivery timing affects price relative to an index:
  - If market expects prices to fall (futures curve in “backwardation”), quicker delivery can command a premium; longer delivery times may be penalised.
- Contract duration:
  - Spot versus term contracts affect pricing; term contracts (monthly, quarterly, yearly) commonly reference indices and may offer lower prices or other concessions to secure stable longer-term supply.
  - Market observation: fines are more likely traded on spot terms (particularly with Chinese purchasers), while lumps and pellets are more likely sold under fixed-duration contracts.

### Steelmaking routes and implications for product demand
- Two main steelmaking routes determine demand for specific iron ore products:
  - Basic oxygen furnace route:
    - Inputs: iron ore, coke, coal and scrap in a blast furnace.
    - Pellets or iron ore lumps are generally included with fines to improve furnace circulation.
    - Liquid iron liquid is usually around 92 percent iron.
  - Electric arc furnace route:
    - Inputs: scrap iron and steel supplemented by “metallics” derived from iron ore (iron nuggets, direct reduced iron, hot briquetted iron, pig iron).
    - Typical product qualities:
      - Iron nuggets: typically around 96-98 percent iron.
      - Direct reduced iron (DRI): pellet or briquette from fines or lumps.
      - Hot briquetted iron: premium form of DRI with greater density and lower impurities.

### Thermal coal — market context, transformation, and trade statistics
- Coal in energy mix:
  - Coal represented around 30 percent of energy consumption in 2014.
- International trade (2014):
  - Total trade of thermal coal: 1.05 billion tonnes.
  - Seaborne trade: around 945 million tonnes.
  - International trade represented around 17 percent of total coal production (the remainder consumed domestically).
- Major exporters by tonnage (2014):
  - Indonesia: estimated 421 million tonnes (mt).
  - Australia: 196 mt.
  - Russian Federation: 127 mt.
  - Colombia: 85 mt.
  - South Africa: 74 mt.
- Major importers by tonnage (2014):
  - China: 219 mt (representing over 20 percent of coal imports globally).
  - India: 175 mt.
  - Japan: 137 mt.
  - Republic of Korea: 96 mt.
  - Chinese Taipei: 58 mt.
- Market features and policy influences:
  - Energy security and environmental policies of major importers/exporters influence coal markets.
  - Tighter environmental regulation in China has changed the profile of coal imports away from high-impurity coals.
  - Indian Government relinquished sole trading role, allowing sub-national governments and private actors to mine and sell directly (IEA, 2016).
  - Price formation: coastal South China remains a clearing market in the Pacific Basin; spot pricing often used for deals based on day of deal or arrival.
  - Recent falls in sea freight rates have increased integration between Pacific and Atlantic basins, improving arbitrage and aligning prices over time.
- Coal processing chain highlights:
  - Mining severance methods: dragline excavators at open pit mines; “bord and pillar” at underground mines.
  - Beneficiation steps: crushing and screening, cleaning (density separation, flotation), drying/dewatering.
  - Cleaning targets impurities such as ash, sulphur and nitrogen; drying reduces transport cost and improves combustion efficiency.
- Thermal coal usage:
  - Around two thirds of thermal coal used by utilities to generate electricity and commercial heat.
  - Coal also used in manufacturing (industrial plants’ power/stearm needs), concrete and transportation.
  - Less than 1 percent of world capacity uses gasification processes to convert coal to gas.

*Source: pr1715mineralspricing - 63.5 percent is adjusted proportionately, based on the actual iron content (percentage) – so a (PDF).*

### 1. Energy Content and quality

### 1. Energy Content and quality

### Energy content and pricing mechanics
- Primary price determinant for coal is its energy content (calorific value), measured in kilocalories per kilogram (kcal/kg) or British thermal units per pound (BTU/lb).
- Energy content range for traded coals: approximately 3,400 kcal/kg to 6,700 kcal/kg.
- End-users purchase coal primarily based on quality to ensure compatibility with boilers; sub-markets form by coal type and energy content.
- Contract pricing:
  - Parties agree either a fixed price or refer to a coal price index representing the coal type and export location.
  - Fixed-price contracts typically have shorter durations, ranging from spot sales to deliveries over 1 year.
- Small calorific deviations are adjusted arithmetically. Example:
  - Contract reference: 6,000 kcal/kg; shipment: 5,900 kcal/kg; illustrative discount: 1.6 percent.
  - Equivalent expression: price becomes (5900/6000)*(reference price).

### Price indices and benchmarks
- API2: benchmark for imported coal to North West Europe (6000 kcal/kg NAR); volume of API2-based derivatives is more than 2.5 billion tonnes.
- API4: benchmark for coal exported from Richards Bay, South Africa (6000 kcal/g NAR).
- API6: benchmark for coal exported from Newcastle, New South Wales, Australia (6000 kcal/kg).
- CAPP (Central Appalachian Coal Price Benchmark): most widely referenced spot price for thermal coal in the eastern USA; reflects value at the CAPP Delivery Zone and excludes onward delivery, emission abatement, or handling charges.
- Argus ICI1-ICI5: five indices for Indonesian exports with calorific values ranging from 3000 to 6200 kcal/kg NAR.

### Moisture
- Moisture content = water in coal; miners remove as much as possible to reduce transport costs and shipping risks.
- Moisture measured as a percentage of the “air dried” coal (equilibrium with atmosphere).
- Contract treatment example:
  - Total moisture specified at 13 percent.
  - Penalty: USD 0.20/tonne for each 0.1 percent above 13 percent.
  - Rejection level: 14 percent.
- High humidity in low-grade coals can cause self-heating, spontaneous combustion risk, or equipment damage.

### Impurities and price penalties
- Key impurity penalties: ash content and sulphur content.
- Ash:
  - Incombustible residue after organic matter combustion; measured as a percentage of air dried coal.
  - Higher ash increases transport and handling costs per unit of energy and creates waste disposal costs.
  - Coal exceeding standard contract ash specifications faces price penalties.
- Sulphur:
  - Emitted predominantly as sulphur dioxide during combustion and can corrode plant equipment.
  - Plants prefer low-sulphur coal or coals within maximum sulphur levels; higher-sulphur coal incurs price penalties unless mitigated by plant-installed removal equipment or post-combustion measures.

### Other technical factors affecting usability and contracts
- Volatile matter:
  - Proportion of air-dried coal released as gas/vapour during standardized heating.
  - Tends to decrease as coal rank increases; higher volatile matter indicates easier ignition and a large, steady flame.
  - Volatile content exceeding 30 per cent of the air dried coal increases risk of spontaneous combustion.
- Grindability:
  - Measured by the Hardgrove Grindability Index (HGI).
  - Varies by rank: low for anthracite, higher for bituminous, lower again for sub-bituminous and lignite.
  - Contracts typically specify typical HGI and a lower HGI threshold that would permit rejection rather than price adjustments.
- Piece size distribution:
  - Size usually does not affect prices because plants pulverize coal, but contracts specify maximum percentages of pieces above 50 millimeters and under 6 millimeters.

### Contract periods and transaction types
- International thermal coal trade is dominated by spot transactions.
- Fixed-price contracts typically are shorter and generally do not exceed 12 months.
- Agreements may be for specified quantities delivered in one shipment or multiple shipments within a specified period.

### Additional information: measurement units, calorific concepts, and conversions
- Tonnes and Tons:
  - Metric tonne = 1,000 kilograms.
  - Short ton (USA) = 2,000 pounds ≈ around 0.907 metric tonnes.
- British thermal units (BTUs): approximately 1055 joules of energy; 1 BTU/lb = 0.556 Kcal/kg.
- Analytical bases:
  - Dry Basis: coal calculated with zero moisture.
  - Dry Ash-Free Basis: data calculated to zero moisture and ash to compare different coals.
- Gross As Received (GAR) and Net as Received (NAR):
  - NAR is lower than GAR because of latent heat losses; approximate conversion: NAR = GAR minus 260 kcal/kg.
- Fixed carbon content: approximated as 100 percent minus the sum of inherent moisture, volatile matter, and ash contents (all on air dried sample basis).
- “Long Term” Contract definition:
  - For most countries: contracts of 1 year duration or less.
  - In the USA: refers to contracts of 3 years or less.

*Source: pr1715mineralspricing - 1. Energy Content and quality (IMF PDF).*

### 99.5 percent gold (known as ‘toll refining’). The gold to be refined is deposited into the

### 99.5 percent gold (known as ‘toll refining’). The gold to be refined is deposited into the

### Refining process and transaction mechanics
- The gold to be refined is deposited into the customer’s account with the refinery, and following refining, the customer would then choose to sell the gold to the refinery with reference to the prevailing spot price or to transfer the gold to the customer’s gold account internationally (see Annex 1 on gold swap arrangements).49
- The refinery will first analyse (assay) the contents of the bar by melting it to ensure there are no pockets of inconsistent purity.
- Based on that analysis, the refinery will indicate:
  - the quantities of gold and silver present;
  - a quoted cost of refining; and
  - the price the refinery would be willing to pay for the metals.
- This information is commonly presented in an “outturn” report (see Additional Information for an example).
- Pricing and payments for doré depend on the physical properties of the bar and the details of the buyer and seller.
- Negotiated payment to the mining company is based firstly on the value of the gold and silver (“payable metals”) present, reduced by “retention fees”, refining charges and in some instances other fees and taxes such as environmental charges.

### Payable metals and the reference price
- Doré is priced based on the measured quantities of gold and silver present in each bar.
- Each troy ounce is priced with reference to prevailing refined gold (and silver) spot prices.
- Other precious metals such as platinum are usually not paid for (although they may be recovered profitably by refineries).
- The reference price is most often based on London Bullion Market Association (LBMA)’s twice-daily electronic auctions. The results of these auctions (AM and PM) are published as an official “LBMA Gold Price”, quoted per fine troy ounce in USD, Euro and UK Pound Sterling.
- Market information services such as Bloomberg and Reuters republish LBMA information and real-time price developments.
- Refineries may:
  - use the LBMA reference price directly for the day the bar was received,50 or
  - slightly adjust this spot price to provide the refinery a commission (i.e., the refinery would take a spread on the price they pay for unrefined gold and the price they receive for selling refined gold).
- Some transactions may use an average of the LBMA price over an agreed time period (quotation period), but this is rare.51
- At the margin, negotiating skills may affect the final agreed price; small to medium sized mines with relatively lower bargaining power may achieve prices below those of large miners.52

### Pricing adjustments and refining fees
- Spot price – location adjustments:
  - For customers that elect to credit the gold into an “unallocated” gold account in London, the spot price may be adjusted to approximate the cost of transporting the gold (see Annex 1 on Loco Swaps).53
  - Adjustments reflect demand-supply balance in both buying and selling locations.
  - Example: Loco Perth (Australia) discount is approximately US 30-40 cents/ounce to the Loco London spot price.
  - When physical gold flows are stable, the adjustments are small.
- Metals lost during refining – retention fee:
  - Payments are usually adjusted to account for losses during refining, sometimes known as a “retention fee”.
  - These adjustments are not published by refineries.
  - Based on discussions with refineries, they appear to be small where major refineries are involved – around 0.1 percent for gold and 1 percent for silver.55
  - The adjustment varies across refineries (for some refineries, it is standardised; for others, it is customer-specific) and is applied without reference to the actual losses incurred on a particular doré bar.56,57
- Refining Charges (RC):
  - Refining charges are applied for removing impurities and separating the precious metals.
  - Refineries may include fees for environmental costs and assay services, but these are small relative to the value of the metal.
  - Refining charges are set per gross ounce – not troy ounce – of precious metal, and are often negotiated for each gold supplier.
  - Factors affecting negotiated RCs:
    - the amount of gold to be processed and size of the customer (higher quantities attracting a lower charge);
    - the expected frequency of refining (one-off transactions typically pay more; longer-term arrangements usually receive a lower charge);
    - the purity of the product to be refined (doré with higher percentages of gold will usually have a lower charge per ounce relative to one with more silver).
  - Individual refining charges are not publicly disclosed; they are closely guarded commercial terms.
  - At the time of writing, refining charges are estimated to be in the order of USD 1-3 per gross ounce.
  - Charges materially higher than these levels warrant closer review.

### Additional information: measurement and wholesale trading
- Gold measurement:
  - Trading unit for gold is fine troy ounces; for silver it is simply troy ounces.
  - A troy ounce is around 31.1 grams, as compared to the standard ounce (around 28.3 grams).
  - For gold, fineness is expressed in parts per 1,000 (e.g., “750 fine” equals eighteen carat).
- Wholesale gold trading:
  - Two key wholesale markets determine the spot price of refined gold (and silver): the “over the counter” (OTC) market and futures exchanges.
  - OTC market characteristics:
    - specified purity (99.5 percent or “995 fine”);
    - gold content (between 350 and 430 ounces, with bars generally close to 200 ounces); and
    - contract settlement in London in two business days (LBMA, 2015).
  - Futures markets are regulated exchanges where price is quoted for delivery at specified future dates; the largest market is the US-based COMEX.
  - OTC gold transactions are conducted on bilaterally agreed terms, anchored closely around spot gold prices.

### Loco (location) swaps – mechanics and example
- Loco swaps simplify and manage the international transfer of gold, reducing physical transport.
- A loco swap is a linked gold purchase and sale of the same quantity which offset one another, where the two parts are for gold in different physical locations.
- Example mechanics:
  - Buy 100 ounces from the miner in Hong Kong, withdrawing 100 ounces from the miner’s account in Hong Kong; and
  - Sell 100 ounces back to the miner in London, depositing 100 ounces into the miner’s London account.
- Pricing example:
  - Assume loco London price is $1002 per ounce and loco Hong Kong price is $1000 per ounce, a discount of $2 per ounce.
  - The miner would then pay the refiner the location discount, in this case $200 (100 ounces at the discount of $2 per ounce).

### Conclusions and possible further work (policy implications and recommended actions)
- Applying transfer pricing rules to commodity transactions – mineral, hydrocarbons and agriculture – remains a complex task for revenue authorities in both developed and developing countries.
- For developing countries to have confidence that related party transactions reflect common market practices, multiple elements must align:
  - transfer pricing rules must be clearly outlined and enforced effectively;
  - drawing on industry understanding and well-developed international information exchange networks is necessary.
- This work on mineral pricing fills an information gap and should benefit developing countries, but more work is needed.
- Several developing countries are starting to apply the methodology and draft case studies, forming a foundation for further research and insight.
- Companies have reacted positively to case studies as they assist governments and companies in moving past discussions on structure and operations to treatment under transfer pricing rules.
- Continued efforts to assist countries are critical. Possible further actions:
  - Practical industry knowledge:
    - Additional case studies on other minerals, oil and gas products, and potentially agricultural markets;
    - OECD plans to continue work with rough diamond valuation and bauxite to be delivered in 2017, and a further study potentially into a rare earth mineral in 2018.
    - Expanded study areas including price setting in freight markets and costs of key mining, smelting or refining inputs.
  - Wider issues:
    - Implementing effective transfer pricing rules remains essential; the toolkit on comparability will address some concerns, and other publications (including a World Bank publication) are forthcoming.
    - Trading hubs: examine remuneration and role of trading and logistics entities of multinationals as a key area of transfer pricing dispute.
    - Price risk management (hedging): further work to examine how companies manage price risks, particularly hedging between related parties and potential base erosion risks.
    - Encouraging greater market price transparency for minerals with opaque markets.
    - Continued capacity building and training at country and regional levels on design and application of transfer pricing rules, sector knowledge, and access to taxpayer information through information exchange.

*IMF press release / report content*

### Annex 1 – Supplementary Mining Industry

### Annex 1 – Supplementary Mining Industry

### Long term supply agreements
- Long-term supply agreements (offtake agreements) establish a purchaser’s commitment to buy specified mineral products in specified quantities; this may cover a mine’s entire production or a proportion.
- Offtake agreements are often signed before mine construction and can assist mining companies to obtain financing for construction.
- Such contracts typically set a pricing mechanism for the duration of the agreement; pricing formulas can cause shipments to occur at prices that differ from the spot price.
- Price divergence can be either a premium or a discount to the spot price, depending on:
  - negotiating ability of the parties;
  - market (demand and supply) conditions for the mineral production;
  - strategic objectives of each side.
- Discounts may be offered by a mining company to secure a stable buyer, reduce search costs, stabilize expected future revenues, or to repay upfront financing costs of mine construction (the discount operating in lieu of cash payments).
- For some minerals (particularly rare earths), purchasers may offer a premium to assure supply when the mineral is critical and/or difficult to source.

### Blending of mine output
- Mines produce diverse outputs; blending is used to create marketable products that meet specifications of larger markets or specific customers (notably when long-term supply agreements exist).
- Blending can optimize overall prices across a mining company’s assets; a more standardized concentrate blend may yield better overall revenues than unblended forms with a smaller customer base.
- Blended products must meet customer requirements, smelter efficiency constraints, environmental standards, and transport safety/maritime guidelines.
  - Example environmental/import constraint: China has prohibited the importation of copper concentrates with arsenic levels above 0.5 percent (Platts, 2014).
  - Transport safety example: copper concentrate can liquefy during transportation if moisture content is too high.
- Commodity-specific notes:
  - Copper:
    - Blending occurs primarily at the concentrate stage, but may also occur earlier (ore stage) using specialised equipment such as stackers to achieve target proportions (ATO, 1998).
    - For smelters, blending can dilute ‘dirty’ concentrates so long as the smelter usually deals with relatively ‘clean’ concentrates (Wellmer et.al, 2008).
  - Iron ore:
    - Blending typically occurs at the mine to ensure grades conform closely with widely traded benchmark products.
  - Thermal coal:
    - Blending can occur at the mine; final users may also blend coal grades to ensure suitability for their boiler(s).

### Shipping – Key Standardised Trade Terms (“Incoterms”)
- For sea-transported products, transportation costs and incoterms significantly affect final price. The most common incoterms are FOB, CFR and CIF.
  - FOB (“Free On Board”):
    - Seller delivers goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered.
    - Risk of loss or damage passes when goods are on board the vessel; buyer bears all costs from that moment onwards.
  - CFR (“Cost and Freight”):
    - Seller delivers goods on board the vessel or procures the goods already so delivered.
    - Risk of loss or damage passes when goods are on board the vessel.
    - Seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
  - CIF (“Cost, Insurance and Freight”):
    - Seller delivers goods on board the vessel or procures the goods already so delivered.
    - Risk of loss or damage passes when goods are on board the vessel.
    - Seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
    - Seller also contracts for insurance cover against the buyer’s risk of loss or damage during carriage, but is required to obtain insurance only on minimum cover; the buyer must expressly agree additional cover with the seller or obtain extra insurance independently.
- “Ex works” term:
  - Supplier makes the product available at the place it was created; buyer pays transport costs from factory/place of manufacture and takes all delivery risks at that point.

### Shipping – Key terms and bulk shipping methods
- Bulk Freight:
  - Ore is free/loose (not packaged or in shipping containers); product usually goes straight into storage hold of the ship.
- Break Bulk:
  - Commodity is in bags, bales, drums, etc.; this can make loading/unloading more expensive.

### Payment terms
- At sight: purchaser must pay on receipt of an invoice from the seller.
- Letter of credit: bank indication from purchaser’s bank that it financially supports the transaction (seller has recourse to the bank if buyer refuses to pay).
- Cash against documents: seller retains ownership until payment; an intermediary (e.g., bank) holds proof of purchase and provides it to purchaser once payment is received.
- Documents against acceptance (D/A): shipping and title documents are passed to buyer by an intermediary only if buyer accepts the accompanying bill of exchange or draft by signing it.

### Documents and communications
- Bill of Lading (“B/L”):
  - Key transport document outlining contents (type and quantity) and destination; document between seller and transporter/carrier.
  - Source: Investopedia.com
- Notice of Readiness (NOR):
  - Communication from a shipmaster advising sender or receiver that the ship has arrived at port and is ready for loading or unloading.
  - Source: Businessdirectory.com

### Report references (selected examples from the annex)
- China import restriction example: Platts (2014), “Copper Concentrate Market Seen Splitting Into Three-Tier System: Citibank”.
- Technical/blending references: ATO (1998); Wellmer et.al (2008); Fountain, C. (2013).
- Incoterms source: International Chamber of Commerce Incoterms 2010.
- Additional referenced institutions and publications include ABARE (1997), Platts (2015), LME (2013, 2015a, 2015b), World Steel Association (2015), and numerous industry and governmental sources listed in the annex.

*Source: Annex 1 – Supplementary Mining Industry (pr1715mineralspricing)*

### Annex 2 – Data Sources on Transactions for Each

### Annex 2 – Data Sources on Transactions for Each Case Study

### Copper — general data and transaction price sources
- International Copper Study Group – Directory of Copper Mines and Plants
  - Contains information on copper product production and key producing countries, current, planned and recently closed mines including ownership and key products produced.
  - From ICSG: “The subscription price for the annual service (2 issues) is €500 for subscriptions originating from institutions based in ICSG member countries* and €750 for subscriptions from non-ICSG member countries. Single copies are available for €400 per year (ICSG member countries*), €600 per year (non-ICSG member countries).”
  - Free sample available at ICSG website (www.icsg.org).
- Concentrates: CRU – Copper Concentrates Market Outlook
  - Includes analysis of concentrate quality, tables and charts indicating copper grades and specifications for payable and penalty elements.
  - Biannually (October, April) plus updates. Also access to CRU analysts.
- Concentrates (China): Asian Metal
  - Offer price data on Chinese copper concentrates, including by region.
  - Concentrate must have minimum 20 percent copper. All prices are “ex works”. Prices available for concentrate produced in Jiangxi, Inner Mongolia, Yunnan and Tibet.
- TC/RC (Japan): Platts Metals Daily, Platts Metals Alert and internal Platts database
  - Publish quarterly information on copper concentrate TC/RC.
  - treatment charges (CIF Japan, code: AAFGC00). CIF Japan, quarterly.
  - Refining charge (CIF Japan, code: MMCCJ00).
- TC/RC (estimates): CRU Copper Report
  - Provides two estimates: mine/trader and Chinese smelter.
  - Calendar monthly. Both are CIF “Asian port”.
- TC/RC (China): Shanghai Metals Market (SMM) - China Copper Market report
  - Includes data on Chinese TC/RCs for imported copper concentrates.
  - SMM publish an annual report, also weekly updates.
- TC (China): Asian Metal
  - Offers data on treatment charges for CIF China (30 percent copper) and FOB Chile (30 percent copper).
  - Daily information.
- Cathode price premiums: CRU Copper Report
  - Provides three estimates:
    - Europe – CIF NW European Port - Premium above the official LME cash settlement price for copper at the time of contract confirmation
    - USA – East Coast delivered - Premium above the official first position COMEX price for copper at the time of contract confirmation
    - Far East – CIF Far Eastern Port - Premium above the official LME cash settlement price for copper at the time of contract confirmation
  - Monthly, reflecting deals done in the previous week.
  - Europe means: CIF Rotterdam. USA means: east coast delivered. Far East means: CIF Shanghai.
- Cathode price premiums: Asian Metal
  - Data on China cathodes, Europe grade A cathodes, US cathodes Zhejiang, Tianjin and Guangzhou.
  - Data is all “ex works”.
- Cathode price premiums: Platts Metals Daily
  - Estimates available for multiple regions and formats (weekly/daily updates). Premiums estimates usually a range.
- Cathode price premiums: Metal Bulletin Research – Base Metals Weekly Market Tracker
  - Provides information on premiums over spot copper prices for Shanghai, Singapore, Rotterdam and USA.
  - Publication also contains information on copper demand-supply balance and price forecasts.
  - Free sample available.
- Penalties: CRU Copper Concentrates Market Outlook
  - Includes analysis of concentrate quality, including tables and charts indicating copper grades and specifications for payable and penalty elements.
  - Biannually (October, April) plus updates. Also access to CRU analysts.
- Others checked: Asian Metal has no information on penalties. CRU Copper Raw Materials publication contains information on sulphuric acid prices obtained by smelters (available at CRU Concentrates).

### Gold — spot and average price sources
- LBMA
  - Publishes the daily AM and PM London fix spot prices in USD.
  - Data on website only for 2015. No data export facility.
  - Indicative (unofficial) prices in EUR and GBP also provided.
  - Free publication.
- Wall Street Journal
  - Publishes daily spot price based on PM London fix. Price in USD. Refers to Handy and Harman base price for gold bar.
  - Data can be exported to MS Excel (XLS), CSV, XML, JSON.
  - Free publication.
- Western Australian Department of Mines and Petroleum
  - Provides schedule of average monthly spot prices (for use in royalty assessment forms).
  - Monthly average spot price, quoted in USD and AUD. Based on London fix.
  - No daily data. As at April 2015, data ranged from 1996 to end-2014.
  - Free publication.
- World Bank “Pink Sheets”
  - Publishes monthly average gold spot price, based on London PM fix.
  - Quoted in USD. Updated monthly. Data available from 1960 onwards.
  - Free publication.
- Platts Metals Daily
  - Third party information on precious metals (e.g. LBMA AM and PM gold price fix, COMEX spot prices).
  - Subscription publication. No unique data. Market commentary on price movements.
- Others checked: Asian Metal – no gold information on website. Perth Mint – no pricing data on website. CRU – no precious metals data, but have information on mines in operation and associated production cost data from 2010. Bloomberg and Thompson Reuters offer commodity data terminals with real time spot market prices.

### Iron Ore — pricing, product specifications, adjustments and market reports
- Minerals Valuation Service (MVS)
  - Provides an analytical tool to compare price information for transactions of common iron ore products, drawing on Platts databases of transactions and research into related price components such as local transport costs.
  - MVS is owned by Platts.
- UNCTAD Iron Ore Market Report
  - 2015 issue covers developments in the iron ore and steel markets in 2014, an overview for 2015-2016, and country, company and project information.
  - Report produced in conjunction with market data firm SNL.
- UNCTAD Iron Ore Statistics Database
  - Statistics available with a subscription. Covers key importer and exporter countries, dates back to 1970. Latest data is for October 2015, covering 119 countries and more than 150 ready-to-use analytical country groupings.
  - Statistics produced in conjunction with market data firm SNL.
- Argus Media – Steel Feedstocks Publication
  - Publication contains: 58% Fe iron ore fines cfr Qingdao; 62% Fe iron ore fines cfr Qingdao (ICX); 65% Fe iron ore fines cfr Qingdao.
  - Delivery period is 2-6 weeks.
- The Steel Index (TSI)
  - Offers reference prices for iron ore fines imported into China and a monthly Iron Ore Review publication. Sample available at TSI.
  - Provides Iron Ore Fines, Chinese Imports (CFR Tianjin Port) for several Fe grades and pellet products (US$/dry tonne).
  - Provides price for 65% Fe concentrate, ex-works, Shandong mine (RMB/dmt including VAT). Payment by D/A. Prices updated weekly.
- Metal Bulletin Research - Steel Raw Materials Weekly Market Tracker
  - Contains information on several iron ore products (Qingdao, China 62% Fines CFR $/tonne; Qingdao, China 65% Pellet CFR $/tonne; India 63.5% Fines FOB $/tonne; China Import Fines CFR $/tonne; China Import Pellet 65-66% CFR $/tonne; Domestic Average, China Concentrate Delivered $/tonne; Domestic Average, China Pellet Delivered).
  - Updated weekly. Free sample available.
- Platts – metals market data package
  - Contains estimate of Australian-origin lump price premium ($USD/dmt) for lumps sold to Chinese steel mills, published quarterly (lump premium in a dollar range).
  - Pellet premium estimates based on term contracts in sales to European steel mills. Based on 65 percent iron. Premium is calculated over Brazil FOB fines product adjusted up to 65 percent iron.
  - Contains ‘netbacks’ which adjust the IODEX index price to remove the cost of shipping from several origins, denoted in $USD/DMT (Australia FOB port Hedland, Capesize vessel; Brazil FOB Tubarao, capesize vessel; East India FOB Haldia/Paradip, handymax vessel; West India FOB Mormugao, handymax, panamax vessels available; South Africa FOB Saldahna Bay, capesize vessel). Deducts dry bulk freight assessments from IODEX 62 percent Qingdao.
- The Steel Index – Daily Edition (email)
  - Contains estimates of freight cost to allow CFR indexes to be adjusted back to FOB terms. Provides estimate of CFR Europe price for 62% Fe index. All estimates in US$/dry tonne for Brazil, Western Australia and India.
- Tex Report – daily report and Iron Ore Manual
  - Daily reports contain news on recent pricing and trade activities, including trade statistics for key iron ore markets and price developments for the Chinese Iron Ore Price Index (CIOPI).
  - Yearly subscription cost up to $USD 1850. Access to reports back to 2004. Free trial available.
  - Iron Ore Manual contains detailed discussion of iron ore markets and economic developments. Publication cost is $US 210-220 depending on region.
- Notes on adjustments
  - The Steel Index offers price differentials for iron and impurities (average spot market values for Chinese imports) for iron (Per 1% Fe 60-64% Fe), alumina (Per 1% Al up to 4% Al) and silica (Per 1% Si 4-9% Si). Updated weekly.
  - Others checked: The Steel Index – no information on moisture price adjustments. Platts – no moisture price adjustments.

### Thermal Coal — market data, pricing assessments, agreements and analysis
- Argus Coal Daily International
  - Publication providing information on recent coal market developments, news and data including:
    - API 2 and API 4 swap prices
    - Argus cif ARA (Amsterdam Rotterdam Antwerp) spot coal assessments
    - Richards Bay prices (South Africa)
    - Newcastle prices (Australia)
    - Asia assessments - cfr south China, cfr east India
    - Turkish assessments - cif Marmara, cif İskenderun
    - Russian assessments - fob Baltic ports, fob Vostochny
  - Americas covered in separate publication. Includes forward price estimates and derivatives.
- Argus Coal Daily Market Service
  - Provides coal market intelligence, pricing and analysis for the US coal markets. Assesses prices in traditional spot markets for physical and over-the-counter (OTC) coal.
  - Includes ‘deals done’, freight rates, and price analysis.
- Platts Coal Trader International
  - Includes Platts price assessments for coal trading in the Atlantic and Pacific markets, including independent and editorially assessed thermal coal prices for the Chinese market.
  - Able to customise data provided. Also have a database of information on power plants worldwide. Includes forward price estimates.
- GlobalCOAL Standard Coal Trading Agreement (SCoTA)
  - Provides standardised set of terms and conditions for international coal sales and purchases.
  - Viewing the standardised contract is free, but using requires signing up to a product licencing agreement.
- IEA Medium Term Coal Market Report 2016
  - Major publication covering coal market developments in a wider energy market context, including trends in coal demand and supply, developments in trading of coal products globally, forecasts of demand and supply conditions, analysis of investment in coal supply, and information on country trade in coal products.
  - Authoritative source on coal market developments, trading and outlook (economic context to the trade in coal).

*Annex 2 – Data Sources on Transactions for Each Case Study.*

---


_Source: https://www.imf.org/-/media/files/news/press-release/pr1715mineralspricing.pdf_