By Nicholas Bariyo 
 

KAMPALA Uganda--Zambia's copper production dropped by 10% on year during the first quarter of 2015, as miners scaled down operations amid a tax dispute with the government, the country's central bank said Monday.

Central Bank report data for Africa's second largest copper producer shows output dropped to 162,000 metric tons, down from 179,583 tons produced in the same quarter last year. First quarter output also fell by 15%, down from the 190,000 tons produced during the last quarter of 2014.

Zambia introduced a new mining tax regime in January that more than tripled royalties for open pit mines to 20%, rattling investors. As a result, companies such as Glencore PLC (GLEN.LN) and First Quantum Minerals Ltd. (FM.T) put on hold expansion projects worth $1.5 billion, while Barrick Gold Corp. (ABX) threatened to close down its Lumwana Copper Mine.

Last month, the country's newly elected president scraped the controversial mining tax regime, slashing royalties to 9% to end a monthslong standoff.

Central Bank Governor Denny Kalyalya said the mining sector suffered from "adverse sentiments" emanating from the mining tax regime, as well as Fitch Credit Rating's downgrade for Zambia.

At the height of the tax spat, the rating agency revised Zambia's long term outlook to stable from positive, citing weakening business environment.

Write to Nicholas Bariyo at nicholas.bariyo@wsj.com

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