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By Brendan Ryan
[miningmx.com] — MAJOR changes to Zambia’s mining legislation are being made to help mining companies operating in the country which have been hit by the global financial crisis.
The changes have been welcomed by mining sector executives who comment the responsiveness of the Zambian government stands in sharp contrast to the hard-line attitudes found in other countries; in particular, Angola and the Democratic Republic of Congo (DRC).
Addressing the African Mining Congress held in Livingstone, the Zambian minister of mines and minerals, Maxwell Mwale, said a number of measures were being introduced in the 2009 budget “in an effort to enhance the profitability of the mining industry and maintain its competitiveness.”
These included the removal of the windfall tax which was highly unpopular with the mining industry; an increase in the capital allowance to 100%; a reduction in the duty on heavy fuel oils from 30% to 15%, and the removal of customs duty on copper powder, copper flakes and copper blisters.
Zambia has also opted to include copper and cobalt concentrates imported to smelters in the country on the import deferment scheme for value added tax purposes.
According to Mwale: “These measures are expected to reduce production costs of mining companies and, at the same time, encourage utilization of local smelting capacity.”
“This review will enhance the already favorable investment environment in the mining sector. Further, Zambia has embraced the extractive industries transparency initiative and is in the process of signing-up on this initiative.”
But Mwale sounded a warning to the mining companies over government’s expectations that they also come to the party by operating more efficiently.
In his speech, he commented: “The mining houses on their part are expected to embrace corporate social responsibility in its broadest terms in order to complement government efforts in uplifting the living standards of our people.”
Interviewed after his presentation Mwale said he believed it was government’s role to provide an enabling investment environment that allowed business to make the investments that will drive the mining sector.
“But there should be no misunderstanding in that so doing the government must act in a responsible way so that its people benefit from the country’s resources.”
Mwale was critical of a number of aspects of the way mining companies were operating in Zambia which he believed drove up working costs and reduced employment opportunities in the sector.
These included the 100% outsourcing of equipment maintenance and repair contracts as well as outsourcing of other key mining functions such as drilling and blasting.
“We think this outsourcing is very expensive and the mining companies could do it cheaper themselves in house because they would have more control over the costs.
“ We realize the mines are getting deeper and operating costs are rising but we believe Zambia’s mining industry is still economically viable at a copper price of $3,000/tonne and that the mining industry needs to find ways to lower its costs.”
Mwale played down suggestions that Zambia was being more responsive to the needs of the mining sector than some of its neighbors.
“We would not like to be seen as moving in isolation. We are a member of SADC and we would look to promote a regional consensus in terms of mining policy,” he said.
Despite this a number of delegates at the conference contrasted Zambia’s pragmatic approach with that of neighboring copper producer the DRC where a review of mining licenses granted in the country has just been conducted resulting in demands for upfront royalty payments and greater equity stakes to be granted to the state.
Mid-tier mining group Metorex is the latest to announce a settlement in the DRC but others are still involved in the process such as Lundin Mining which is the junior partner in the Tenke Fungurume copper/cobalt mine.
Paul Conibear, senior vice-president projects for Lundin Mining, told the conference” “We are under a lot of pressure on the contracts and the dialogue continues.”
Asked to elaborate in an interview after his presentation, he said: “The big issue is cash. They want up-front payments. I would hope that the impact of the global financial crisis is having some impact on the approach of the DRC government.”