Rise in royalties will affects mines negatively, says chamber of mines

Rise in royalties will affects mines negatively, says chamber of mines

Miners in  Zambia may have to scale down operations in the face of a move to raise royalties by the new government of President Michael Sata, the general manager of the country’s chamber of mines said on Monday.

“The increase in mineral royalty will significantly raise costs for the mining companies … Each mine will have to examine its own cost structure and depending on the impact of the higher tax, some may decide to shut down certain sections,” Frederick Bantubonse told Reuters.

Sata’s government unveiled an expansive 2012 budget on Friday, with big increases in social spending and farming subsidies to be paid for by a rise in mineral royalties and a debut $500 million Eurobond.

The budget puts pressure on the mining firms with a doubling of copper royalties to 6 percent.

Even before the populist Sata was swept to power in September, the previous administration was aiming to boost tax revenue from miners and was auditing mining firms.

Foreign mining firms in Zambia include Brazil’s Vale , Canada’s First Quantum Minerals and Barrick Gold and London-listed Vedanta Resources and commodity giant Glencore.

Zambia’s copper production is around 750,000 to 800,000 tonnes a year but is seen growing as investment pours into a sector that had been neglected and nationalised.

According to Reuters’ Metal Production Database (here), Zambia will produce around 1.3 million tonnes of copper from mine and leach operations by 2014. At that stage, it could be the world’s fifth-largest producer of copper concentrates.

Reuters

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