The resource is improved and you dont have to spend the gpt to keep the resource. The amount of production lost through this method of improving tile resources is, IMO, negligable. Cities can only improve Strategic Resources, and once placed, will grant the resources once you have discovered the tech to see them (and the tile improvement for the resource, but lets be honest who doesn't have mines by the time strategic resources are actually a factor). As gimmme said, it will only give you the base tile resources, but it will also delete the luxury resource. First off, when placing a city, unless absolutely necessary, dont place the city on a luxury resource.
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