Top Zimbabwe gold miner warns higher royalty would hit profits

Caledonia Mining Corp. said a proposal by Zimbabwe’s government to double the royalty on gold producers would curb its profits.

“If implemented, it would be expected to result in a lower level of profitability and cash generation relative to current market expectations,” the company said Monday in an emailed statement.

Caledonia, one of the country’s top gold producers, said it’s assessing “the implications on its portfolio of assets,” after last week’s government budget proposed hiking the royalty to 10% from Jan. 1. That would ensure Zimbabwe shares in the record-breaking rally in bullion prices, Finance Minister Mthuli Ncube told lawmakers.

The gold company — listed in New York, London and Victoria Falls — warned that the royalty threatens its flagship Blanket mine, which has benefited from higher prices and output.

“The change in the royalty structure could largely impact returns and investment flows for large scale miners,” Harare-based brokerage IH Securities said in a note on Monday. “Gold and mining counters may experience narrower post-tax margins from royalty adjustments.”

(By Ray Ndlovu)