Copper miners in Zambia have halted $2 billion of planned investments because a royalty tax introduced last year makes the projects unviable, according to an industry lobby group.
A plan by First Quantum Minerals Ltd. to invest $1 billion extending the life of its Kansanshi operation won’t proceed until the royalty is deductible from other corporate taxes, said Sokwani Chilembo, chief executive officer of the Zambia Chamber of Mines.
The same goes for EMR Capital-backed Lubambe Copper Mine’s project to invest a similar amount in a new mining operation, he said.
“We need this royalty payment regime removed for progress to begin,” Chilembo said in an interview. “If the government thinking is otherwise, good luck.”
John Gladston, a spokesman for Vancouver-based First Quantum, declined to comment.
Earlier this month, Lubambe CEO Nick Bowen said Zambia’s changing tax regime makes investment difficult.
Loyce Saili Communications Manager at Lubambe Copper Mine said the Lubambe Extension Project announced by Lubambe Copper Mine Limited on August 19,2020 has not been halted.The Mine is currently in productive discussions with the Government of the Republic of Zambia (GRZ) regarding various approvals and tax matters.
Zambia’s uneasy relationship with mining investors has deteriorated over the past 12 months, with the government clashing with Glencore Plc over the Switzerland-based company’s plan to mothball Mopani Copper Mines’ operations.
Zambia’s increasingly aggressive stance over the nation’s key export industry may partly reflect maneuvering by President Edgar Lungu as he struggles with economic challenges ahead of next year’s elections.
Zambia doesn’t get enough from its mineral resources, but would be willing to consider mining company grievances over the royalty, Finance Minister Bwalya Ng’andu told state television on Sunday.
Mining investors are pushing for tax cuts after Zambia approached external creditors for as much as $1 billion in debt-servicing relief as the government seeks to restructure its foreign loans.
Zambia, Africa’s No. 2 copper producer, depends on the metal for about 70% of its export revenues.
The chamber expects the coronavirus pandemic to cut output this year to about 764,188 tons, far short of Zambia’s target of 1 million tons.
The revenue-based royalty increases from a minimum of 5.5% to 7.5% when copper trades at $6,000 to $7,500 a ton, with a further jump to 10% should prices top $9,000.
Copper has traded above $6,000 since the end of June.
The royalty represents a double taxation of producers, which also pay corporate income tax, Chilembo said.
“This pushes up the effective tax rate and makes these projects unattractive given the cost of capital,” he said. “As soon as the double taxation element is removed, these projects become viable.”
The chamber wants the royalties to be deductible from profit tax
Hold tight Zambia,
Don’t give in, even if they don’t dig now , future generations will benefit
We should be aiming for a time when 80% of revenues from our minerals remain or are reinvested in Zambia
The Mine owners benefit more from copper mining. They never pay income tax forever and bring in very little forex thus the Kwacha depreciation, so it is better that our copper remains in the soil for future generations. The electric car revolution is just around the corner and copper will be more valuable. Gvt,please do not relent to their arm twisting.Let them keep their $2 billion.
The Government should not give in. Mines are currently not benefiting us in absence of reasonable Royalty tax. They do not pay corporate tax forever and bring in very little forex thus our Kwacha depreciation. We should preserve the copper for future generations. The electric car revolution is around the corner and copper will be more valuable and somebody will come who is ready to pay royalties and agree to it not being tax deductible. Keep your $2 billion.
I’m just wondering why Chinese owned mines seem to be quiet and don’t say anything, what’s their secret?
Nothing is working in this country anymore, inflation, exchange rate, reserves, price of mealie meal, unemployment all unacceptably high, and some body is talking of Covid which only came yesterday. Hell bound characters, you cant survive it
poor kwacha against foreign currencies despite giant mines namely; Mopani, KCM, Lubambe, Kansanshi, Kalumbila, emeralds mines etc.
Nothing seems to benefit this country.
LET US CHANGE THE ECONOMIC MODEL