Zambia Renegotiating Copper Mining Tax as Prices Soar 2006-06-14 10:02 (New York)
By Nasreen Seria and Stewart Bailey
June 14 (Bloomberg) -- Zambia, Africa's biggest copper
producer, is in talks to raise taxes on mining companies after
lawmakers pressured the government to secure a greater share of
the benefits from rising metal prices.
The government is talking with ``major'' mining companies to
increase taxes on all contracts that currently stipulate a 0.6
percent royalty on sales, mines minister Kalombo Mwansa said today
in an interview in Johannesburg.
Mwansa is under pressure to raise taxes after First Quantum
Minerals Ltd., Vedanta Resources Plc and other companies that mine
copper in Zambia posted record profit as prices more than doubled
in the past year. South Africa, the world's biggest gold producer,
has proposed a 3 percent tax on bullion sales and 2 percent on
copper. Zambians earn less than a dollar a day on average.
``There is a lot of pressure from parliament and civil
society on us that we are not getting enough revenue, especially
in view of the high price of copper,'' he said. ``We need a lot of
money for government programs to build schools, roads and for
poverty reduction in general.''
While copper prices have dropped by a quarter from a record
$8,800 ton on May 11, the metal has posted a fourfold gain in the
past four years. Copper for three-month delivery on the London
Metal Exchange traded at $6,580 at 2:56 p.m., local time. The
metal traded as low as $1,336 a ton on Nov. 7, 2001.
Investment Soars
Investment in Zambia's copper industry by Chinese, Canadian,
Australian and Indian companies soared since the government sold
state-owned Zambia Consolidated Copper Mines in 2000. Glencore
International AG also owns copper operations in Zambia while
Equinox Minerals Ltd. is digging a new mine.
Vedanta Resources hasn't had any ``official communication''
from the Zambian government that copper mining taxes would be
increased, Sumanth Cidambi, associate director of investor
relations said in an e-mail. Kevin van Niekerk, Equinox Minerals'
spokesman, couldn't immediately be reached for comment when called
by Bloomberg.
The government has formed a committee, including officials
from the ministries of finance, mines, commerce and industry and
justice and the Zambian Revenue Authority, to negotiate with the
companies, Mwansa said. The talks are likely to be completed
within months rather than years, he added.
``Whatever we are going to do, should not increase the risk
of mining investment,'' Mwansa said. ``Our agreed position is that
it will still be competitive.''
Mining Risk
Neighboring Tanzania charges a tax of 3 percent on sales of
metals used in industry, such as copper, and Zimbabwe between 2
and 10 percent.
Zambia goes to the polls in the last quarter of this year,
where the ruling Movement for Multiparty Democracy's Levy
Mwanawasa will seek re-election for a second and final five-year
term in office. Zambians earned an average of $352 in 2005,
according the International Monetary Fund.
During the past three years, copper miners invested as much
as $1.5 billion, according to Mwansa.
``When these investments bear fruit, we are going to see an
increase in production to phenomenal levels,'' he said.
Copper production is expected to rise to 800,000 metric tons
by 2008 from 600,000 tons this year, and increase to 1 million
tons by 2010, he added.
The drop in copper since last month was ``temporary'' and
prices will probably rebound to between $7,000 and $8,000 a ton
for the rest of the year, boosted by strong demand for the metal
from China, Mwansa said.
--Editor: Griffiths |
