Government is rapidly addressing Mines concerns on the new Mineral Royalty Tax-Lungu

Filed under: Statements |

lungu manPresident Edgar Lungu has assured mining companies operating in Zambia that Government is rapidly addressing their concerns on the new Mineral Royalty Tax.

This is according to a statement released to the media by his assistant for press and public relations Amos Chanda.

According to the statement, President Lungu has made this assurance after completing a series of consultations with individual mine owners and collectively with the Chamber of Mines of Zambia (CMZ). All the meetings with industry representatives took place at State House over the past two weeks.

The Chamber of Mines of Zambia has assured the President they were confident the Government was positively working towards a speedy conclusion of the matters.

The Head of State is therefore concerned with recent reports that owners of Lumwana Mine would put the mine under care and maintenance, a development that would put over 4000 jobs at risk.

President Lungu regrets that Barrick Gold has announced that the 135,000 tonnes per year Lumwana Copper Mine will be placed under care and maintenance by end of February 2015 and noted that no other production cuts have been announced.

The Head of State has assured that Government will not allow a single mining job to be lost and has accordingly directed the Ministry of Mines to ensure that operations at Lumwana Mine are not idled for care and maintenance.

If the investors proceed to idle the mine, one of the measures to be explored will include the identification of a suitable Strategic Technical Partner to team up with ZCCM-IH, the Government’s investment arm in the mining sector to assume the operations.

President Lungu has therefore assured Lumwana workers that their jobs are secure and there is no cause for alarm.

The President has noted that the industry outlook is that Zambia together with the Democratic Republic of Congo will remain among the few countries with the potential to increase copper production as well as their market share of global production.

However, following the sharp decline in copper prices at the beginning of 2015, focus is being placed on assessing its likely impact on this optimism on Zambia’s role in the copper market and whether this needs to be reassessed.

Since 2000, copper production in Zambia has been increasing reaching a peak of 760,000 tonnes in 2013 before recording a drop to 708,000 tonnes in 2014.

“It should be noted that copper production performed poorly in 2014 even before the new mining tax regime was introduced,” the President said.

“With forecast prices of copper of US$6,350/tonne in 2015 and US$7,250/ tonne in 2016, Government expects the majority of the mining companies to continue to operate without major disruptions. Zambia’s copper production is likely to close at 900,000 tonnes for 2015, the highest ever levels since 1975,” the President said.

Under this environment, Government’s priority remains one of engaging the mining industry with a view of mutually developing a fiscal and regulatory regime that provides a “win-win” solution for all.

Meanwhile, the Commissioner-General of the Zambia Revenue Authority, Mr Berlin Msiska, has issued a Gazette Notice to effect amendments to Rule 18 of the VAT Act providing for conditions of zero-rating of exports that usually places the mining companies in an untenable VAT refund position.

The Statutory Instrument was signed on Thursday, 19th February 2015 and published in the Government Gazette on Friday, 20th February 2015.

With regard to the consultations over the new Mineral Royalty Tax regime, the Commissioner-General, at the direction of the Head of State, has opened negotiations with mining companies to explore the relief entitlements within the provisions of the law.

Under the Mines and Minerals Development Act, there is a provision for the Mineral Royalty Deferment Scheme. The Commissioner-General may, on application by a holder of a mining right, defer payment of royalty due from the holder upon meeting set conditions.
So far, a number of mines have applied for consideration under the Deferment Scheme and government wishes to advise mining companies to stay within the law.

The President has assured that the progressive steps that have followed the negotiations will lead to further positive outcomes that should settle the matter in the coming weeks.

Under the chairmanship of President Lungu, the consultations have included the Minister of Finance, Minister of Mines, Minister of Commerce, Minister of Justice, and the Zambia Revenue Authority.

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