Good news for the mining sector in Zambia, there are indications the country may be backing away from plans to impose a 20% royalty rate on open pit mining in the country, a top executive with Barrick Gold said last week. Zambia’s Finance Minister Alexander Chikwanda rattled mining companies with investments in the copper-rich southern African country earlier this month when he announced that from January royalties on open pit mines will rise to 20% and on underground mines to 8% from 6% currently.Barrick, which is the world’s biggest gold producer but also owns the Lumwana copper mine in Zambia, has said that a 20% royalty would seriously challenge the economics of the large open-pit mine.
“Our sense is that the government realises that the numbers they have imposed will be very challenging for the industry,” Barrick co-president Kelvin Dushnisky said on a conference call to discuss the company’s third-quarter results, which were released late on Wednesday and beat market expectations. “I don’t want to handicap anything, but going into this week, our sense is there would be movement away from that number. I can’t guarantee it but that’s certainly the direction discussions were going,” he said.
The death this week of Zambia’s 77-year-old president Michael Sata, and a period of national mourning, could impact the timing of the new regulations, which were due to come into effect on January 1, 2015, Dushnisky said.
h3. Barrick’s Man in China
In commentary accompanying its results overnight, Barrick said it had appointed a president in China, Woo Lee, a former US state department employee, who would join the company’s leadership team. Barrick has no operations in China but the company’s new executive chairman John Thornton has made no secret that he would like to increase relationships with the Chinese, possibly as future partners in Barrick’s big mining projects. Asked on the conference call if the importance that Barrick was placing on relationships in China was related to the company’s plans to reduce its debt, possibly through asset sales or partnerships, Dushnisky said:
“There’s been strong appetite from China in regard to the resource space generally… We wouldn’t close the door on any of those kinds of options,” he said. Dushnisky said Barrick, whose heavy debt levels have weighed on its stock price, is working on reducing its net debt levels to US$ 7bn from US$ 10.4bn through a combination of increasing cash from operations and asset sales.
In its third-quarter results overnight, the Toronto-based company lowered its forecast for full-year 2014 costs for the second time this year and also increased its forecast for copper production this year.