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Zambia, Mining Companies Enter Copper Tax Talks

Zambia is in talks with mining companies over recent increases in mineral royalties, signaling the possibility of a compromise over the southern African country’s new tax regime on the eve of presidential elections scheduled for Tuesday.

Three-way talks involving government officials, company executives and union representatives are under way in the Zambian capital Lusaka to determine the best way mining proceeds can be shared without hurting the industry, according to Rayford Mbulu, Zambia’s Deputy Labor Minister.

A successful outcome of the talks could avert the layoff of more than 10,000 mine workers as well as the closure of Barrick Gold Corp. ’s Lumwana copper mine in the country’s North Western province. A compromise could help ease pressures on Zambia’s copper-mining industry which is confronting a slump in the price of copper. Copper prices fell to a five-year low last week.

“The talks are ongoing and we are listening,” Mr. Mbulu said. “Nothing is beyond revision at this stage.” Company officials confirmed the talks.

Under the new royalty regime, which came into effect in January 01, open pit mines are now required to pay as much as a 20% royalty on their revenue, up from 6% previously, while underground mines are paying 8%, up from 6%. The new royalty rates apply to production of all base metals of which copper makes up around 90% of Zambia’s production. The government scrapped income tax for the mines at the same time.

The Wall Street Journal

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