Zambia’s cabinet approves copper royalty changes

Zambia’s cabinet has approved changes to the country’s controversial copper mining royalties, although details on the changes remain unclear.

Zambia’s cabinet has approved changes to the country’s controversial copper mining royalties, although details on the changes remain unclear.

The royalties are expected to be adjusted downwards after the government of Africa’s second-largest copper producing nation raised them on open-pit operations at the start of the year to 20% from 6%, and to 8% on underground mines from 6%.

President Edgar Lungu announced the cabinet’s approved amendments in a statement on April 13, without clarifying what the amendments are.

Reuters reported that the royalty would be lowered to 9%, but this is unconfirmed. The Zambian State House press office did not respond to requests for information at the time of publishing.

Mining operators within the country did not have any further information on president Lungu’s announcement.

“We are hopeful,” an official at a copper producer in the country said. “[The industry has] been engaging extensively with the government about the exorbitant tax rate that we’re expected to pay while also trying to stay in business. It’s not an easy market at the moment, and we’re fighting on all fronts.”

It is thought the government is ready to lower the royalties after copper production in the country declined by 130,696 tonnes, according to the presidential statement.

“[The amendments] follow extensive consultations with the mining industry in the light of significant changes in the fundamental assumptions upon which the law was based and the sudden fall in the price of copper on the international market,” Lungu said in the statement.

“The budget approved by parliament had the assumption that the price of copper was going to be $6,780 per tonne, but this has reduced to $5,665, representing a reduction of $1,115 [per tonne],” he said.

The Zambian cabinet will propose the details of the changes to parliament for approval on April 20.

In March, Lungu tasked the finance and mining ministries to review and change mining royalties by April 8. At the time, he said Zambia should consider reverting to the 2014 tax regime until a more consensual outcome could be negotiated.

Companies operating within Zambia include Glencore, African Rainbow Minerals, Vale, Vedanta and First Quantum.

Bianca Markram

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