The new taxation scheme that was passed in Zambia that would impose a 20 percent gross rotalty on revenue is too much for Barrick Gold Corp. which annouced that it will suspend operations at its copper mine in Lumwana.
Barrick will take an impairment charge after the country passed the legislation to more than triple the royalty rate on openpit mining operations, The Wall Street Journal reported.
The new taxation scheme eliminates corportate income tax but raises the gross royalty from 6 percent to 20 percent.
“The introduction of this royalty has left us with no choice but to initiate the process of suspending operations at Lumwana. Despite the progress we have made to reduce costs and improve efficiency at the mine, the economics of an operation such as Lumwana cannot support a 20 percent gross royalty, particularly in the current copper price environment,” co-president Kelvin Dushnisky said.
China is the world’s largest consumer of copper, and signs that its growth is slowing have weighed on copper prices all year.
Toronto-based Barrick had warned in October it might halt operations at Lumwana if the country raised the royalty rate.
Like other miners, the company has been under pressure in recent years to cut costs and focus on more-profitable projects amid lower commodity prices and after building up large debts buying assets during the boom years.
Barrick said it would record the impairment charge related to Lumwana in the fourth quarter. The operation’s current net carrying value is about $1 billion, it said.
The operation will be put on a care and maintenance basis, with job cuts starting in March. The mine supports about 4,000 direct jobs. n