About half of Zambia’s copper production is lossmaking after prices of the metal extended declines to the lowest level since 2009, the local chamber of mines has said.

The price slump combines with higher mineral royalties introduced this month to put pressure on mines in Africa’s largest producer after the Democratic Republic of Congo, says Jackson Sikamo, president of the industry lobby group.

Prices of the metal, used in piping and wiring, fell the most in six years because of lower energy costs and weaker-than-expected economic data in China, according to Goldman Sachs Group. Copper for delivery in three months on the London Metal Exchange dropped as much as 8.6% to $5 353.25/t, the lowest since July 2009. It fell by the daily limit in Shanghai.

“We are obviously very concerned about this development,” says Sikamo. “We’re running some of the oldest mines, which operate at a very high cost.”

Even before the drop in copper prices, the Zambia Chamber of Mines said the new system replacing tax on profit with higher mineral royalties would lead to mine closures and lower production in the country. The Southern African nation increased royalties to 20% from 6% for openpit mines and to 8% for underground operations in a bid to collect more revenue from the industry.

Lower copper prices may erode government revenue in Zambia, which was due to hold Presidential elections on January 20.

Copper accounts for about 10% of Zambia’s gross domestic product, a quarter of government revenue and more than 70% of export earnings, according to the International Monetary Fund. “The economy’s exposure to copper price developments is significant, especially in terms of the balance of payments,” says Tobias Rasmussen, the fund’s resident representative in Zambia. “Over the years, the economy’s fortunes have to a large extent been moving with copper prices.”

Local units of Glencore and Vedanta Resources own mines with some of the highest production costs in the country, according to data from the chamber. Barrick Gold has already announced plans to put its Lumwana operation under care and maintenance because of low prices and the new tax regime.

The chamber does not expect other producers in Zambia to immediately join Barrick in cutting output or jobs, Sikamo says.

When copper prices fell in the global financial crisis of 2008 to 2009, Zambia’s economy still grew at a rate exceeding 8%, Rasmussen says.

“A precipitous drop in prices could cause mines to scale back production, which would magnify the negative impact on the economy,” he adds. “But production decisions are generally based on long-term assessments and are not that sensitive to short-term price movements.”

Mines that struggle under the new tax system can apply for relief from the Zambia Revenue Authority, Finance Minister Alexander Chikwanda told reporters in Lusaka last week.