Most copper producers in Zambia losing money — Chamber of Mines
Over half of Zambia’s copper producers are currently losing money due to metal prices hitting five and a half year lows and a recent mining tax hike that severely penalizes most operations, the country's Chamber of Mines said on Monday.
The industry body, in a statement issued the day before Zambians go to the polls to elect a new president, added that controversial royalty increase has already began scaring investors away.
But the situation may soon change, as authorities are said to have began talks with the country’s top miners, signalling the possibility of a compromise over the southern African country’s new tax regime, WSJ reports.
Zambia, one of Africa’s two largest copper producers, tripled mining royalties to 20% from 6% on January 1, putting the government at loggerheads with mining firms already struggling with falling commodity prices.
If the ongoing negotiations around the tax issue succeed, the country could be saving about 12,000 mining jobs, as well as keeping some of the operations that have already announced plans to pack up and leave, such as Barrick Gold (TSX, NYSE: ABX) Lumwana copper mine.
$7 billion in investments down the drain
Fellow Canadian miner First Quantum Mineral (TSX:FM), Zambia's largest foreign investor, warned in October that the new tax system would “inevitably” lead to fewer new jobs and dissuade entrepreneurs from investing in the country. Earlier in the year, the company had already delayed investment projects worth $1.5 billion in Zambia due to uncertainty over the fiscal regime.
Meanwhile, the world’s third-largest miner by market value Glencore (LON:GLEN) halted last year over $800 millions worth of copper projects in the country, and idled operations at its Sable Zinc Kabwe mine.
Zambia, for decades Africa’s top copper producer, was pushed down in 2013 to second place for the first time since 1998, as the Democratic Republic of Congo’s (DRC) output grew by 50%.
Should the country keep the recently hiked taxes, the country stands to lose $7 billion, or 30% of its GDP, over the next five years, Zambia’s Chamber of Mines warns.