Matthew Hill Lusaka
A NEW Zambian tax system that prompted Barrick Gold to halt operations at its Lumwana mine might lead to 12 000 job losses in the industry next year, the country’s mines chamber said.
The system that takes effect on January 1 might also push companies including Glencore and First Quantum Minerals to cancel projects, and cut Zambia’s copper output by more than 158 000 tons next year, the Chamber of Mines said in a statement yesterday.
That risks further slowing economic growth in Africa’s second-biggest producer of the metal that the International Monetary Fund said on Friday might fall to a 12-year low in 2014.
Zambia’s parliament this week approved Finance Minister Alexander Chikwanda’s 2015 budget, which includes a law replacing corporate income tax for mines with higher royalties. Levies for open-cast mines rise to 20 percent from 6 percent and increase to 8 percent from 6 percent for underground mines. “The 2015 budget will adversely impact tens of thousands of lives, and we ask government to pause while it reconsiders its implementation on January 1,” the chamber said.
Marginal Mines
The government would not reverse the tax changes as the system would allow the country to get its “fair share” of revenue from the industry, state-owned ZNBC radio cited Mines Minister Christopher Yaluma as saying yesterday.
Barrick said on Saturday it would start the process to place its Lumwana copper mine under care and maintenance, because the new tax system made the operation unviable. Zambia lost its place as Africa’s biggest copper producer to the Democratic Republic of Congo last year, when output was about 790 000 tons.
“With the passing of the new mining fiscal regime in Zambia, there could be other marginal mines in Zambia that could be at risk of closing,” Patrick Jones, an analyst with Nomura International in London, said in a reply to questions. The local units of Glencore and Vedanta Resources “are likely now under greater pressure than before and thus could be at risk”.
Lumwana has about 4 000 workers, while the industry employs a total 62 236 people, according to the chamber’s website. –
Bloomberg