MAC: Mines and Communities

There's gold in them thar hills - and African governments want a bigger piece

Published by MAC on 2015-01-28
Source: Mining.com (2015-01-27)

Zambia' president has made it clear that he's not going to retract or dilute the country's recently-introduced new mining taxation laws in order to recover more wealth for the exchequer. See: Zambia's bold move to rein in mining 

Other countries are following suit, including DR Congo - much to the chagrin of the governor of its own Katanga province.

Zambia’s new leader to keep polemic mining tax

Cecilia Jamasmie

Mining.com

26 January  2015

Zambia's newly elected President Edgar Lungu has no intention of reducing or eliminating the controversial mining tax affecting most copper producers operating in the country.

What Lungu did drop from his administration was vice president Guy Scott —who was briefly Africa's only white leader — as he announced his cabinet on Monday, Ventures Africa 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.

According to the country’s chamber of mines, over 50% of the currently operating copper miners are losing money mostly due to the tax hike.

Lungu’s move underscores a growing trend across the continent, where governments from Tanzania to Guinea are changing tax regimes and adjusting ownership structures to get a larger share of natural resources.

Gold giant Barrick has already announced it is halting its Lumwana copper mine, which provides nearly 4,000 direct jobs in the area.

Fellow Canadian miner First Quantum Mineral, 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  has said it is idling operations at its Sable Zinc Kabwe mine.

Slumping copper makes things worse

From 1997 to 2013, mining attracted $12.6bn in foreign investment to Zambia, according to industry figures. The capital injection helped the southern African nation become one of the continent’s star economic performers, with average annual GDP growth of 6.4% over the last decade.

Today, mining employs 90,000 people and contributes about three-quarters of the country’s foreign exchange earnings and 25-30 % of government revenue.

But weakening prices are hitting the industry hard. Last week, the red metal hit fresh 5 1/2-year lows of $2.49 per pound, the lowest since July 2009 and down 13% so far this year. Copper bounced back Monday at $2.51 a pound on the Comex division of the New York Mercantile Exchange.


Congo risking billions with planned tax hike, mining code revision

Cecilia Jamasmie

Mining.com

27 January 2015

Wealthy former businessman Moise Katumbi, has seen the mining industry flourish in the country since becoming Katanga governor in 2006. “Money
doesn’t like noise, investors don’t like noise and bankers don’t like noise. If they respected the mining code, people would have invested $100bn instead of $25bn today.”

The Democratic Republic of Congo may lose its position as Africa’s top copper producer amid unresolved disputes over revisions to its mining code, including plans to hike royalties and raise the compulsory stake for state-owned companies in new ventures.

According to the governor of the mineral-rich southeastern province of Katanga, Moise Katumbi, the country is jeopardizing billions of dollars by neglecting the terms on which companies made their original investments, FT.com reports.

“It is better to have the old mining code with $200bn of investment than the new one with $5bn,” he was quoted as saying about the long-dragged review of the 2001 code:

The central African nation has been singled out as deliberately increasing the risks mining companies with operations in the country took at a time of conflict and turmoil. The government wants to increase revenues from the industry by doubling taxes and royalties for miners. Companies, in turn, complain of government harassment and poor power and transport infrastructure.

While the Democratic Republic of Congo holds significant reserves of diamonds, gold, cassiterite and coltan, mining companies have been mostly drawn to invest mostly in copper-rich Katanga.

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