Glencore, Barrick to Pay Higher Royalties in Zambia After Budget

Oct. 10 (Bloomberg) — Zambia will increase mineral royalties and remove corporate income tax for mines as Africa’s second-biggest copper producer seeks to boost revenue collection from companies including Barrick Gold Corp. and Glencore Plc.

Royalties will increase to 20 percent for open-pit mines and 8 percent for underground operations, Finance Minister Alexander Chikwanda said today in the capital, Lusaka, as he presented his budget for 2015. The government will seek to quickly and amicably resolve a dispute with mainly mining companies over refunding value added tax, Chikwanda said.

The mining tax changes will “achieve a more equitable distribution of the mineral wealth between government and the mining companies,” he said.

Chikwanda is trying to cut a budget deficit that Fitch Ratings Ltd. projected at 5.8 percent this year, while at the same time boosting growth and job creation. Increasing royalties even after copper prices retreated by almost 7 percent over the past 12 months would be “unfortunate” timing, Yvonne Mhango, a sub-Saharan African economist at Renaissance Capital, said earlier this week.

First Quantum Minerals Ltd. and Barrick have open-pit mines in Zambia, while Vedanta Resources Plc and Glencore run underground operations. The country lost its status last year as Africa’s biggest copper producer to the Democratic Republic of Congo.

The government will increase spending to 46.7 billion kwacha ($7.4 billion) next year, Chikwanda said. Roads development and agriculture will receive some of the biggest shares of funding, he said.

To meet local stock-market regulations, the government will reduce its 87 percent shareholding in ZCCM Investments Holdings Plc, through which it owns minority stakes in the country’s mines, to 60 percent, he said.

To contact the reporter on this story: Matthew Hill in Lusaka at [e-mail] To contact the editors responsible for this story: Antony Sguazzin at [e-mail] John Viljoen, Emily Bowers