The Zimbabwe Chamber of Mines has warned that the continuous hiking of mining taxes and royalties in the precious metals sector will reduce profits, slash productivity and slow down the rebuilding of production capacity by gold and platinum miners.

Chamber president Winston Chitando writes in the latest edition of the Chamber of Mines Journal: “The latest changes to the resource taxation regime will certainly add more nightmares to gold and platinum miners. In aggregate, the gold and platinum sectors require $4-billion in new capital to fund working capital as well as rebuild production capacity mauled by ten years of recession, which led to the closure of all but one gold mine by December 2008. Some gold mines are still under care and maintenance, three years into dollari- sation and economic stabilisation, while only two of those that have reopened have tasted profitability since the fight to recover began in 2009.”

Since the announcement of new royalties, which shocked the entire mining sector, with industry analysts two weeks ago cautioning that they could be the death knell for a sector already reeling under the heaviest mine tax regime, the Zimbabwe government has reinforced its position, saying the move is intended to maximise the sector’s contribution to the National Treasury.

Bulawayo-based economic commentator Victor Nyoni told Mining Weekly that, if implemented without amendment, the new mining taxation laws will deter new investors, force the struggling gold miners to close down and slash the sector’s contri- bution to national economic recovery.

“For a country that has pinned all hopes for national economic growth on the mining sector, this taxation regime will only achieve the opposite. It’s a very greedy and vindictive taxation formula and there is a very thin line between such practices and robbery, except that, here, it happens in a legalised context. Government needs to consult widely and listen to sound advice on how to structure taxation models [based on] a win-win formula. Government should stand ready to hold itself responsible when gold miners sink because of the tax burden it continues to load onto them,” Nyoni said.

Mines and Mining Development Minister Obert Mpofu said it was highly unlikely that there would be any changes to the proposed tax regime. He said Zimbabwe was looking to extract as much value as possible from its mineral wealth.

“The Ministry remains focused on getting all benefits out of the exploitation of our mineral endowments for the benefit of all Zimbabweans. While we understand that the Chamber of Mines does not want to lose profits, we firmly believe it would be unfair on the people of Zimbabwe if we allow foreign mining companies to exploit our minerals and pay a pittance in return. They will have to pay the taxes or try other countries. We have no shortage of investors,” Mpofu said.

In his 2012 Budget, tabled in November, Finance Minister Tendai Biti proposed to hike the resource rent for gold to 7% from 4.5%, of the gross revenue, while platinum mining royalties would increase from 5% to 10% of gross revenue.

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