President says new price-based royalty to boost mines investment

February 20, 2016 8:42 AM

Mining lobbies had asked for a price-based royalty structure to ease the tax burden during a period of depressed prices.

A miner sweeps the floor underground at the Chibuluma copper mine in the Zambian copperbelt region in a file photo. REUTERS/Rogan Ward

The Zambia Chamber of Mines said on Friday the new price-based copper royalty approved by the government would boost investment in new projects in Africas second-biggest copper producer.

Zambia will next month start implementing its new royalty system that varies depending on the copper price as it seeks to keep struggling mines open and limit job losses.

The royalty would be 4 percent when the price of copper was below $4,500 a tonne, 5 percent when it was between $4,500 and $6,000 and 6 percent when above $6,000, presidential spokesman Amos Chanda said on Friday.

"This shows that the government is striving to collect revenue from the industry in the way that does not discourage mines from investing in new mining projects and new employment," Chamber of Mines spokesman Talent Ng'andwe said.

"The gesture by the government is a good life-line," Ng'andwe added, saying the prevailing low copper prices posed a serious challenge to mining operations.

Mining companies operating in Zambia including Vedanta Resources and Glencore have cut thousands of jobs and closed copper shafts in recent months with prices near six-year lows.

Zambia in June last year cut mineral royalties for underground mines to 6 percent from 9 percent and those of open cast mines to 9 percent from 20 percent following an outcry by mining firms.