Zambia won’t reverse mining royalty hike

Tax hike pushed Barrick to idle its Lumwana copper mine, located in Zambia’s Northwestern Province. (Image courtesy of Barrick Gold)

Zambia is pushing ahead with its plans to more than triple royalties on open-pit mines in a move that will leave up to 12,000 jobless and which is likely to sour the already fractious relationship between the government and mining companies.

Mines minister Christopher Yaluma said Tuesday it would raise rates from 6% to 20% for open pits and from 6% to 8% for underground operations on Jan.1 as planned, because it was in the best interests of what is Africa’s second largest copper producer.

“It will be negligent of the government to undo what we did. We applied our minds when coming up with the new rates and can’t just change because of an outcry,” Yaluma told Reuters.

The move, which has prompted warnings of closures and thousands of job losses, underscores a growing trend across the continent, where governments from Tanzania to Guinea are changing tax regimes and adjusting ownership structures to get a larger share of natural resources.

Gold giant Barrick (TSX:ABX) has already announced it is halting its Lumwana copper mine, which provides nearly 4,000 direct jobs in the area.

Fellow Canadian miner First Quantum Mineral (TSX:FM), Zambia’s largest foreign investor, warned in October that the new tax system would “inevitably” lead to fewer new jobs and dissuade entrepreneurs from investing in the country. Earlier in the year, the company had already delayed investment projects worth $1.5 billion in Zambia due to uncertainty over the fiscal regime.

Meanwhile, the world’s third-largest miner by market value Glencore (LON:GLEN) has said it is halting over $800 millions worth of copper projects in the country and idling operations at its Sable Zinc Kabwe mine.