Higher royalty fees for copper mines in Zambia may result in the
closure of several mines in Africa's second-largest copper
producer, the Chamber of Mines warned Friday.
Plans to more than triple royalty fees for open pit mines,
effective January next year, will make several of them inviable,
threatening jobs and output, said the chamber, which represents
mining companies that operate in the country, including Glencore
PLC (GLEN.LN) and First Quantum Minerals Ltd. (FM.T), Vedanta
Resources PLC (VED.LN) and Barrick Gold Corp. (ABX).
Several copper expansion projects may be halted as a result, it
added.
Earlier this week, the country's parliament approved the 2015
budget, under which open pit mines will pay up to 20% in royalties,
compared with a current level of 6%. Royalties for underground
mines also will be raised to 8% from 6%.
"The imminent implementation of the 2015 budget measures may
make a number of other operations economically inviable,
potentially leading to further mine closures" the chamber said.
The warning highlights increasing tensions between the
government and the mining industry as the former seeks to benefit
more from the country's natural resources.
The International Monetary Fund on Friday warned that the
Zambian economy would expand to its slowest pace in more than a
decade during 2014, partly due to the government standoff with
miners over royalties.
"Lower world copper prices and the announced shift to a
royalty-only mining tax regime, with high rates, are likely to
adversely affect the mining sector," IMF said
On Thursday, Barrick said it would close down its Lumwana copper
mine, a day after the 2015 budget was approved, saying the new
royalty doesn't take into "consideration the profitability" of
operations. It said it would record the impairment charge related
to the operation in the fourth quarter.
The chamber said that the closure of Lumwana now threatens at
least three copper smelters that have been treating concentrates
mined at the open pit mine.
A government spokesman could not be reached immediately for
comment.
Write to Nicholas Bariyo at Nicholas.Bariyo@wsj.com
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