A DECISION by Zambia to review a recently promulgated mining royalty law – the results of which will be made known on April 13 – has been welcomed by investors in the Southern Africa country.
According to Mark Bristow, CEO of Randgold Resources, however, it provides pause for thought about the value of history.
“Zambia is a classic example. The country nationalised its copper industry in the Nineties and the whole thing collapsed. It was privatised and they attracted investors and things went really well,” he said.
“Now they’ve gone back to a different set of parameters and harvested all the cash flow. Just 18 months of this will lead to a slow death. It’s such a stupid thing to do,” he said.
Zambia’s late former president, Michael Sata, was a long-standing nationalist and hardliner in respect foreign investment so not even his passing in September could halt legislation that stowed corporate tax in favour of revenue-based royalties, as much as 10% in some cases.
The newly-elected Edgar Lungu has since called on his mines and finance ministers to consider a range of options from negotiating an interim tax to deferring the new system or modifying the law, but some damage has been done.
Barrick Gold said it would stay the axe on jobs at its Lumwana copper/gold mine, but it seems to be too late for Vedanta Resources whose CEO, Tom Albanese, has called for “huge” restructuring at its Nchanga mine.
First Quantum Minerals said it would not proceed with up to $1bn in investment at its Kansanshi mine in Zambia.
Elsewhere in Africa, there’s evidence of mining code changes that fail to take cognisance of Zambia’s lessons.
The Democratic Republic of Congo is now reviewing its mining code the first iteration of which would have seen mining companies actually pay the government to invest, said Bristow.
“What we’re saying to the Congolese government is that the existing mining law, which was written collaboratively with the World Bank in 2002 is now starting to work,” said Bristow. “Projects are coming to the end of the recoupment of capital and they are paying full tax,” he said.
Kenya, Ivory Coast and Mali have either initiated, or are considering, mining code changes which Bristow said were mixed in terms of their impact.
“The Ivory Coast has taken the sophisticated route of saying ‘we don’t have mining so how do we encourage it’,” he said.-miningmix.com