Rev. Rul. 83-99

1983-2 C.B. 100.

                       Internal Revenue Service
                                 Revenue Ruling

      DEPLETION;  MINING PROCESSES;  SOLVENT EXTRACTION AND ELECTROWINNING

                            Published: July 18, 1983

26 CFR 1.613-4: Gross income from the property in the case of minerals other than oil and gas

  Depletion;  mining processes;  solvent extraction and electrowinning.  The Service will follow the courts' decisions in Union Carbide and Ranchers Exploration in recognizing that solvent extraction processes applied to ores or minerals are mining processes under section 613(c)(4)(D) of the Code.  However, the Service will not follow Ranchers Exploration to the extent that it recognizes the electrowinning process as a mining process.

  The Internal Revenue Service will follow the results of the courts' decisions in Union Carbide Corporation v. Commissioner, 75 T.C. 220 (1980), and Ranchers Exploration and Development Corporation v. United States, 634 F.2d 487 (10th Cir. 1980), in recognizing the solvent extraction process as substantially equivalent to precipitation and, therefore, a mining process under section 613(c)(4)(D) of the Internal Revenue Code.

  The Service, however, will not follow Ranchers Exploration in recognizing the electrowinning process as a mining process.  The court found that the electrowinning process, although it was electrolytic deposition, was necessary to the mining process of leaching, taking it out of the category of nonmining processes under the exceptions set forth in section 613(c)(5) of the Code.  The court found electrowinning to be a mining treatment process since it extracts the first identifiable material from the raw ore leach solution.

  The electrowinning process falls within the term electrolytic deposition, and the Service continues to hold that electrolytic deposition is not a specifically enumerated mining process under section 613(c)(4)(D) of the Code. It is specifically excluded from mining processes by section 613(c)(4)(D) and section 613(c)(5). Therefore, the Service will continue to treat electrowinning as electrolytic deposition, a nonmining process under section 613(c)(4)(D) and section 613(c)(5).

Rev. Rul. 83-99, 1983-2 C.B. 100.