Zambia royalties

The proposed royalty rate increases in Zambia is bad news for producers and potential producers. Notice that royalty rates for open pit mines will increase from 6 to 20% for open pit mines and from 6 to 8% for underground mines. Even though the intent is that income tax will essentially fall away, the impact of the royalty increases will be significant. Royalties are seemingly calculated on sales revenue so very bad news for any deposit with tighter margins (i.e. Mumbwa). Barrick has already suspended activities at their Lumwana open pit mine and Glencore and First Quantum have put development plans on ice.

An increase in royalty rates was not considered in the OPS sensitivity analysis published by BTR in April last year. They are now facing an 8% revenue royalty payable to the Government as well as the 2% NSR payable to BHP. If the Government sticks to its guns and ignores feedback from mining companies, it may well put Mumbwa on the backburner until further notice.

Wonder if management will make a statement in this regard or provide an updated NPV number based on the changed variables. One would expect so as this is quite a material development for the company's prospects going forward. My own rough model suggests that the impact could be quite substantial.

What is IAU doing in this regard? Are they part of the lobbying group in Lusaka seeking to discuss this or are they hoping the big boys will sort it out? Seems like the Government is taking a hard line as they feel certain companies have not fully declared their production numbers (and therefore have been under paying tax for years).