Zambia: Miners Skipped Opportunity to Argue Against New Taxes

- January 3rd, 2019

The deadline for companies to respond to the government’s request for information was last Friday, though is not clear when the government invited companies to make submissions.

Zambia has accused miners crying foul about new mining laws of not providing a convincing argument that their operations are negatively affected.

Ministry of Mines permanent secretary Paul Chanda accused miners of not even bothering to explain to the government how the new laws would impact profitability, after being given the opportunity to do so.

“We wanted them to show how the new taxes will affect production and profitability but so far we haven’t received anything …two mining companies have written to us asking us to give them more time but we haven’t heard anything from the others,” said Chanda in an interview with Reuters.

The deadline for companies to respond to the government’s request for information was last Friday (December 28, 2018), according to Chanda. It is not clear when the government invited companies to make submissions.

In September last year, the government announced that it would be increasing taxes on mining through the introduction of a new 10-percent tax on copper mining when the red metal was valued at more than US$7,500 a tonne and by increasing its sliding scale for royalties of 4-6 percent by 1.5 percentage points.

Miners and the government have been engaged in a war of words ever since, with the government threatening to expel foreign workers if international companies started laying off their workforces in response to the higher taxes.

Canada’s First Quantum Minerals (TSX:FM) said shortly afterwards that it would be firing 2,500 workers anyway.

Other miners operating in Zambia include Glencore (LSE:GLEN), Barrick (TSX:ABX) and Vedanta (NSE:VEDL).

The changes kicked in on Monday, January 1, and are intended to help the government reign in debt.

In December, the Zambian Chamber of Mines had said that the new taxes would make mining in the southern African country unprofitable at current prices.

Copper is currently valued at US$5,838 a tonne on the London Metal Exchange — only a few dollars above its 2018 low.

Zambia clocks in as the seventh-largest copper producing country in the world, and second in Africa, making extractive industries a major contributor to the national economy.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.

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