According to Reuters, Zambia will raise royalty taxes on open pit and underground mining from today, despite strong resistance from the mining industry fears of up to 12,000 job losses. The decision to increase royalties for open pit mines to 20% from 6% and those for underground mines to 8% from 6% has angered unions and mining companies alike. There had been hopes that the government would change its plans to a softer approach. But, Reuters reports, “Mines Minister Christopher Yaluma said on Tuesday the government would implement the new royalties system as is when it comes into effect on January 1 because it was in the best interest of the country, Africa’s second-largest copper producer.”

“It will be negligent of the government to undo what we did. We applied our minds when coming up with the new rates and can’t just change because of an outcry,” Yaluma told Reuters. He added that mining companies should come up with clear models showing how their businesses would be hit by the royalties for the government to consider any revision.

The Zambia Chamber of Mines statement of some weeks ago noted that it had “reviewed the 2015 National Budget and its position is that the new mining tax regime is entirely unsustainable. Our sincere appeal to the Government is that, this industry needs to be nurtured so that it continues to generate revenues required to diverse our economy and continue to progress on the path of increasing mining and manufacturing production to sustain and continue to create jobs. The Zambian Mining Industry will continue to be the engine of the Zambian economy for a long time to come. We strongly advise Government to reverse its decision.”

Zambia’s Chamber of Mines said this month the new royalties would result in shaft closures and 12,000 jobs losses, and may make a number of other operations economically unviable.

“The long-term impacts are projected to affect:

•Mine production

•Production costs

•Jobs (direct, indirect and induced)

•Suppliers of goods and services to the mining industry will have no business

•Overall reduced revenue collection by ZRA (Zambia Revenue Authority).

Barrick Gold has already suspended operations at its Lumwana copper mine, which supports nearly 4,000 direct jobs in the area. Lumwana produced around 118,000 t of copper in 2013. “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% gross royalty, particularly in the current copper price environment,” said Co-President Kelvin Dushnisky.

“We sincerely regret the impact this will have on our people, as well as the communities and the businesses that depend on Lumwana, and we remain hopeful that the government will consider an alternative solution that will allow the mine to continue operating,” said Co-President Jim Gowans.

In the meantime, Barrick will initiate procedures to transition Lumwana to care and maintenance. Major workforce reductions are planned to commence in March, following the legally required notice period. The transition to care and maintenance is expected to be completed in the second quarter of 2015.

The 25,000-strong Mine Workers Union of Zambia is deeply concerned about job losses. Its President Chishimba Nkole told Reuters: “There must be flexibility on the part of the government and they must act very swiftly because we don’t want our members to lose their jobs.”

First Quantum, which operates Zambia’s largest copper mine, Kansanshi, and a significant number of other operations has said the plan is a “massive disincentive” for investment if it does not come with some form of capital relief.

So far there has been no statement from ZCCM-IH. This is a successor company to Zambia Consolidated Copper Mines Ltd (ZCCM) in which the Government of the Republic of Zambia holds 87.6% of the shares with the remaining 12.4% held by private investors. ZCCM-IH holds a JV shareholding in many of the copper operations.