Zambia to Increase Mine Royalties to 3% From April 1
2007-02-09 10:41 (New York)
By Geoffrey Kapembwa and Stewart Bailey
Feb. 9 (Bloomberg) -- Zambia, Africa's biggest copper
producer, will increase taxes on mining companies as it seeks to
benefit from a surge in metal prices, Finance Minister Ngandu
Magande said.
The nation will increase royalties to 3 percent of sales,
Magande said in his annual budget speech to parliament today in
the capital, Lusaka. Royalties were previously set at 0.6
percent for base metals, and at 2 percent for precious metals.
``At the time when copper prices on the international
market were low, mining companies were offered tax concessions
in order to make their project viable,'' Magande said in his
annual budget speech to parliament today in the capital, Lusaka.
``Now that the prices are high, there is need to review these
concessions so that the nation can benefit from the increased
earnings from the mining companies.''
Copper accounts for about 70 percent of Zambia's export
income and production has been rising in recent years after the
government sold the industry back to private investors after
taking it over from Anglo American Plc in the early 1970s.
Under-investment by the state had slashed annual production from
about 500,000 metric tons to 200,000 tons a year.
Zambia produced 458,296 metric tons of copper between
January and November, 2006, up 14 percent from the 400,593 tons
produced in the same period a year earlier, according to Bank of
Zambia statistics.
Tax Increase
Zambia will also increase mining companies' income tax
rates to 30 percent, from 25 percent, and will reintroduce a 15
percent withholding tax on dividends, interest, royalties,
management fees and payments to affiliates, Magande said.
First Quantum Minerals Ltd., Vedanta Resources Plc and
Glencore International AG all own copper operations in Zambia.
The new royalties are unlikely to affect many companies
already mining in the country, most of which have
``stabilization'' agreements with the government, Philip Pascal,
executive chairman of Vancouver-based First Quantum said today
in an interview at the African Mining Congress in Victoria
Falls, Zambia.
The agreements provide for royalties to be fixed, he added.
First Quantum, along with companies including Toronto-based
Equinox Minerals Ltd. and Teal Exploration and Mining Inc.,
entered the country after the government sold Zambia's copper
mines to private investors in 1995.
First Quantum's agreement with the government runs for
about another 15 years, Pascal said.
Inflation Target
``Zambia has a commitment to developing mines,'' Rick
Menell, executive chairman of Toronto-based Teal said today in
an interview in Zambia. ``I'm confident the government will take
a pragmatic approach.''
It's unlikely that Zambia's mines ministry will ``abrogate
existing agreements,'' Mennell added.
Zambia will target an economic growth rate of 7 percent in
2007 and plans to reduce inflation to 5 percent, Magande said.
The country will also aim to reduce borrowing to 1.2 percent of
gross domestic product, he added.
Achieving an inflation rate of 5 percent this year will be
difficult, said Razia Khan, Standard Chartered Plc's chief
Africa economist.
``Inflation fell to single digits - its lowest level in
thirty years - in 2006, but this was mostly because of the sharp
appreciation of the kwacha, which is unlikely to be repeated,''
Khan said.
Zambian inflation accelerated to an annual 9.8 percent in
January, from 8.2 percent in December, the Central Statistical
Office said Jan. 25.
Copper for delivery in three months on the London Metal
Exchange gained $150, or 2.8 percent, to $5,560 a metric ton as
of 3:14 p.m. local time. The metal hit a record $8,800 in May.
--Editor: Richardson |
