Maravi

Zambia could earn trillions and not a few billions from copper - Mwale

Zambia could earn trillions and not a few billions from copper - Mwale
By Joan Chirwa
Tuesday June 12, 2007 [04:00]

MINES deputy minister Maxwell Mwale has said Zambia could earn trillions of kwacha from its copper resource after the renegotiations as opposed to the K35 billion gained from royalties during the 2005/2006 financial year. And University of Zambia lecturer in the School of Mines professor Imasiku Nyambe has said the renegotiation of development agreements with mining companies from the current 0.6 per cent to three per cent could help Zambia channel the money towards infrastructure development.

Meanwhile, the 17 largest privately held copper mines in Chile, most of the units of large international mining firms, posted a net joint profit of $3.03 billion (approximately K9 trillion) in the first quarter of this year and contributed about US $1.17 billion to the Chilean government, according to filings with the SVS securities overseer.

Mwale, in an interview, said Zambia needs more money for various developmental projects through meaningful contributions to the treasury from different mining investments in the country.

He was commenting on figures released by finance minister Ng’andu Magande indicating that Zambia earned K35 billion from mineral royalties during the 2005/2006 financial year at the 0.6 per cent rate against profits of about K1.5 trillion recorded in the mining sector.

"Zambia needs more money to finance different projects. We can get a lot of money from our minerals but since that is not the situation now, that is the reason why we run into budget deficits every year," Mwale said.

"We need to make more money and not the K35 billion that the country got in the financial year 2005/2006. The contribution that the mining companies are currently making is too small compared to what they are earning and we need to improve on that."

Mwale further said people's calls for a windfall tax on profits for mining companies was justifiable since prices of copper on the world market were high.

"Copper pricing shot up by over 500 per cent over the past few years and no wonder people have been calling for a windfall tax on profits for these mining companies operating in Zambia. This can be the only way this country can get a reasonable amount of money from its mineral resource."

Professor Nyambe said Zambia's initiative to re-negotiate development agreements with mining companies as suggested by the World Bank and the International Monetary Fund (IMF) is the right way to collect money that can be used for the improvement of infrastructure in the country.

"Government needs all the support for the re-negotiation of the development agreements and ensuring that the mineral royalties are raised from 0.6 per cent to three per cent. We should not forget that copper is a diminishing resource and it is important for us to get benefits from it now when we still have it in abundance," said Professor Nyambe.

Copper prices on the London Metals Exchange are around US$7,125 per metric tone, although the figure as at last Friday was about four per cent lower than what was obtaining a fortnight ago.

And according to the Market Watch, the net profit of the 17 largest privately held copper miners in Chile was 15 per cent higher than the $1.14 billion the same companies posted in the first quarter of 2006, according to the filings.

Latest data indicates that Chile earned a total of US$8 billion (approximately K25 trillion) from royalties during the 2005/2006 financial year, while countries like Zambia with huge copper mines only earned an average of K35 billion.

And during the first quarter of this year, Chile earned a total of US$270 million in copper royalties (approximately K1 trillion) and US$900 million from income taxes (approximately K3 trillion).

Spot copper prices in the first quarter of 2007 averaged $2.69474 a pound on the London Metal Exchange, higher than the $2.2469 average in January-March 2006, based on state copper commission Cochilco's market data.

Escondida, the world's largest privately held copper mine, led the group, with a quarterly net profit of US$1.29 billion on sales of US$2.04 billion.

Los Pelambres came in second with a US$326.7 million net profit on sales of US$513.7 million.

Sur Andes rounded out the top three, with a US$278.4 million net profit, on sales of US$514.5 million.

This is the second private mining company other than Escondida which filed detailed financial results with the SVS.

Only one mining company in Chile saw higher profits and larger sales than Escondida.
State mining giant Corporacion Nacional del Cobre, or Codelco, posted a comparable net profit of US$1.43 billion, on sales of US$2.3 billion.

While Codelco reports pre-tax profits in its quarterly SVS filings, in its press reports it provides a comparable net profit figure.

Labels: ACC, CHILE, COPPER, DEVELOPMENT AGREEMENTS, MAXWELL MWALE, MINING, MINING CONTRACTS

posted by MrK @ 3:54 AM