Barrick Suspends Lumwana As Zambia's Royalty Hikes Deemed Excessive Thursday December 18, 2014 8:30 AM
Barrick Gold Corp. (NYSE: ABX)(TSX: ABX) will suspend its Lumwana copper mine, located in Zambia, as the government has passed legislation that will see the country’s royalties rise from 6% to 20%. Barrick notes that while the corporate tax in the country was removed, a 20% gross royalty on revenue will be introduced Jan. 1, 2015. "The introduction of this royalty has left us with no choice but to initiate the process of suspending operations at Lumwana. Despite the progress we have made to reduce costs and improve efficiency at the mine, the economics of an operation such as Lumwana cannot support a 20 percent gross royalty, particularly in the current copper price environment," says Kelvin Dushnisky, co-president of Barrick. "We sincerely regret the impact this will have on our people, as well as the communities and the businesses that depend on Lumwana, and we remain hopeful that the government will consider an alternative solution that will allow the mine to continue operating," says Jim Gowans, co-president of Barrick. The company says they have placed the mine on care and maintenance with major work reductions to begin in March and eventually to be completed by the end of the second quarter of 2015. The company also notes they expect an impairment charge related to the mine in the fourth quarter; it has a carrying value of roughly $1 billion. “In the first nine months of 2014, Lumwana produced 138 million pounds of copper at C3 fully allocated costs of $2.98 per pound,” the company says. “The mine had 6.6 billion pounds of copper in reserves as of Dec. 31, 2013.” |
