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Foreign mines seek tax and fuel cuts in Zambia

Part of Glencore’s
Mopani copper mining
operation in Zambia
Lusaka, Zambia — MININGREVIEW.COM — 07 January 2009 – Foreign owners of Zambian copper mines have approached the country’s government to cut both fuel prices and mining taxes introduced this year, in order to assist them in surviving the current commodities downturn.

Zambian mines minister Maxwell Mwale revealed this to Reuters here, after he and labour minister Austin Liato had held crisis talks with a group of copper and cobalt mining companies.

Mwale said the mine owners had pressed the government to reduce electricity tariffs and fuel prices, and to cut some taxes, including a 25% windfall tax introduced last April. “They want reductions in electricity tariffs and taxes, and also referred to the removal of some levies on fuel,” Mwale told Reuters.
Zambia has some of the highest fuel prices in southern Africa at nearly US$2 per litre, and mining companies have also complained of higher electricity tariffs. Mwale said the government wanted to keep mines operational, but insisted that more consultation was needed.

As well as the 25% windfall tax, the government has introduced a 15% variable profit tax on income above 8% of sales; raised mineral royalties to 3% from 0.6%; and corporate tax to 30% from 25%. This prompted some mining firms to threaten litigation, saying the government had reneged on development agreements it had signed with them to maintain lower taxes.

Key foreign investors in Zambia’s mining sector include Canada’s First Quantum Minerals, Australia’s Equinox Minerals, London-listed Vedanta and Swiss firm Glencore International AG.