HomeBase MetalsBarrick keeps Lumwana open following revised Zambian tax legislation

Barrick keeps Lumwana open following revised Zambian tax legislation

Zambia – Barrick Gold Corporation has revealed it will continue operating its Lumwana copper mine in Zambia following the recent announcement of a new tax system by the government of Zambia.

This was announced as part of the company’s first quarter 2015 results.

On April 20, 2015, the Zambian government announced amendments to the country’s mining tax regime that would replace the recently adopted 20% gross royalty on open pit mines with a 9% royalty, along with the reintroduction of a 30% corporate income tax and a 15% variable profits tax.

Based on Barrick’s initial analysis, this system would enable Lumwana to remain free cash flow positive at current copper prices. Lumwana’s production is anticipated to be 250-270 Mlb of copper cash costs of $1.90-$2.15 per pound in 2015. The company’s total copper production for 2015 is expected to be between 480 and 520 Mlb.

Capital expenditure re-evaluation

Barrick has launched a detailed evaluation of all capital expenditures for 2015 and 2016. All spending plans will be re-assessed against its capital allocation objectives, including a minimum hurdle rate of 15% return on invested capital. Expenditures that do not meet its capital allocation objectives will be cancelled or deferred.

The company has already identified $200 million in capital expenditure reductions for 2015, with further reductions expected as its continue to implement its new capital allocation framework.

The reductions identified thus far have been partially offset by an increase in copper sustaining capital following the decision to continue operations at Lumwana. As a result, total capital expenditure guidance for 2015 has been reduced by $100 million to $1.8-$2.1 billion.

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