Increasing mining taxes and royalties in Zambia and the Democratic Republic of Congo (DRC) are creating a climate of uncertainty, international metals and minerals researcher Roskill copper associate consultant Jonathan Barnes tells Mining Weekly.

“Copper demand globally generally increases year-on-year and there is an ongoing and urgent need for new mines and new mine capacity to be developed, as well as a need for more smelters and refineries.”

Despite high-grade Copperbelt deposits, the position of the Zambian and DRC governments regarding taxation and royalties, as well as operational difficulties, creates a difficult environment for existing miners and investors who are planning potential projects.

Zambia Finance Minister Margaret Mwanakatwe said in September that the country will introduce new mining duties and increase royalties as the country aims to reduce its budget deficit. DRC President Joseph Kabila signed a new mining code, which increases royalties and taxes on mining companies, into law in March. The new mining code increases royalties on copper from 2% to 3.5%.

Barnes notes that copper prices are low, and the economies of Zambia and the DRC rely heavily on the copper mining industry for taxes. “It is unhelpful that taxes and royalties in these countries are being increased at a time before the copper price has reached a level where the industry could ‘afford’ these additional payments”.

He warns that, subsequently, investors will consider prospects in more mining-friendly environments. Investors will avoid the risks of investing in environments where the government opportunistically raises taxes and royalties when faced with shortages, he comments.

“If Zambia and the DRC are not able to facilitate and generate the growth that is required in the copper industry, other countries will look to fulfill the need,” Barnes concludes.