(Adds mining reaction, details from paragraph 5 onwards)
Zambia's newly elected government Friday doubled royalties for
mining companies dealing in base metals as it seeks to fund an
ambitious debut budget aimed at creating jobs and reducing poverty
in the southern African nation.
Effective next year, mining royalties for base metals such as
copper and nickel would be increased to 6% from 3%, Finance and
Planning Minister Alexander Chikwanda said. Royalties for precious
metals will be increased to 6% from 5%.
Zambia, Africa's top copper miner, last year registered a record
copper production of 820,000 metric tons thanks to expansion
projects at various mines in the country.
Michael Sata, who became president in the September polls, had
premised his election campaign on populist promises like improving
workers' conditions and increasing government stakes in the
country's copper mines.
Since then a wave of strikes has hit Zambia's Copperbelt
province, mainly at Chinese-owned mine projects, as workers
agitated for improved conditions and wages.
Friday's move has caused concerns in the mining industry with
Fredrick Bantubonse, the director of the Chamber of Mines of
Zambia, saying the royalties increase could "reverse the gains"
registered in the sector in recent years.
"By the time government realizes, it may be too late to reverse
the decision" he said, adding that Zambian mining companies remain
vulnerable to the volatile global copper markets as well as higher
mining costs.
Zambia will spend at least 27.7 trillion Zambian kwacha ($5.5
billion) in 2012 compared with ZMK20.5 trillion during 2011. The
increased spending will be channeled mainly to education,
agriculture and health sectors as Sata seeks to make good on his
promises during the election.
Last week, Sata said during the official opening of the national
assembly that he would increase budget spending to reduce poverty
and create jobs for the youths, who he credited for electing the
Patriotic Front government.
"The challenge of my government is to improve the quality of
life for the majority of our people…to this end government will
introduce programs to accelerate the social economic empowerment of
citizens especially the youth and women" he said.
Zambia is also planning to issue a $500 million Eurobond this
year to fund infrastructure projects, according to Chikwanda.
Copper mining companies operating in Zambia such as
Toronto-listed First Quantum Minerals Ltd. (FM.T), London-listed
Vedanta Resources PLC (VED.LN), Glencore International AG (GLEN.LN)
Brazil's mining major, Vale SA (VALE) and China Nonferrous Metals
Co.'s (8306.HK) are implementing projects worth over $2 billion,
which are poised to lift the country's annual copper production to
2 million metric tons by 2015.
-By Nicholas Bariyo, contributing to Dow Jones Newswires;
256-75-2624615 bariyonic@yahoo.co.uk