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Gold/Mining/Energy : Copper - analysis
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To: LoneClone who wrote (1750)4/19/2007 9:30:07 AM
From: LoneClone  Read Replies (1) of 2131
 
Zambia can't alter mining agreements

Source: Hoovers

The Zambian government cannot alter mining development agreements it signed with mining companies some years when copper prices were low, the minister of justice said in a statement Wednesday.

In a ministerial statement to parliament, George Kunda said the mining development agreements were "above the law" and couldn't be changed due to a number of provisions the government pledged to observe.

In February, Finance Minister Nga'ndu Magande said he planned to increase royalty fees for mining companies from 0.6% to 2.5% and corporate tax to 30% from 25% through an amendment to the Mines Act.

Several mining companies immediately questioned the legality of the changes.

In the late 1990s Zambia embarked on a massive privatization program of its copper mines amid low metal prices on the world market. At the time the then state-owned mining company Zambia Consolidated Copper Mines was making huge losses as a result of a lack of investment and increased production costs. A number of mines were sold and the government offered incentives to attract investors, including fixed period tax and royalty rates. But crucially the agreements included a clause that said they couldn't be overridden by any law introduced subsequently.

The Zambian government is trying to reform the mining sector, which has seen investments of up to $2 billion between 2002-2006. Copper output has grown from around 300,000 tons in recent years to reach close to 500,000 tons in 2006, and output is forecast to reach 600,000 tons this year and possibly as much as 1 million tons by 2010.
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