Charlotte Mathews
21 April 2008
Johannesburg — DIVERSIFIED metals miner Metorex said on Friday it was analysing the effect of Zambia's new super tax on copper mining profits on its Chibuluma South mine, where the company is increasing monthly ore production to 60000 tons.
The group had not decided to take legal action to enforce its development agreement, which included a tax stabilisation clause, Metorex (MTX) operations director Edward Legg told analysts on a visit to the mine last week.
But he said it reserved its right to do so, although it was continuing talks on the issue with the government through the Zambian Chamber of Mines.
The International Herald Tribune reported in February that Zambian copper miner First Quantum told the Zambian parliament it would have no choice but to take legal action to enforce a legally binding development agreement signed with the government, if the new taxes were introduced.
African Rainbow Minerals CE Andre Wilkens also said in February that it was waiting for the outcome of talks with the government on the new tax before making a decision to go ahead with subsidiary Teal Mining's Konkola North copper project.
The Zambian government has raised the corporate tax rate to 30% from 25% with effect from April 1, and hiked the royalty on copper profits to 3% from 0,6%. It has also imposed a windfall tax on copper profits, which kicks in when London Metal Exchange copper prices exceed a certain level.
Copper miners in Zambia differed with the government on the effects of the tax, Legg said. They argued that the total effective tax at current copper prices could exceed 50%, while the government has said the maximum tax rate should not exceed 47%.
The extra taxes on copper miners will not affect Metorex's Sable Zinc operation in Zambia.
Chibuluma South, which had been mining 40000 tons of ore a month, was ramping up production to 50000 tons a month and was expected to reach that target this month , Chibuluma Mines GM Edward Mounsey said.
The mine is also about to recommission an old leach plant to treat a surface stockpile of about 60000 tons of copper oxide, which it believes can be processed profitably at current copper prices. Underground production from Chibuluma is in the form of copper sulphides, which require different extraction techniques from copper oxides. The underground production is processed at Konkola Copper Mines in Kitwe, 10km away.
Once the surface stockpile is exhausted, which could take five or six months, management will look for other copper oxide resources to put through the plant. This could mean buying ore or exploiting other deposits in the area that are not economically viable on their own.
Mounsey said the leach plant could add up to 100 tons of copper a month to Chibuluma's output.
While 50000 tons a month was the maximum possible production from the underground mine, Mounsey said Chibuluma was looking at various options to extend the mine's life beyond 2016. It had employed consultants to review its ore reserves statement, using new information. Management was also doing a feasibility study into the viability of mining the Chifupu deposit south of the mine.
Chibuluma's other opportunities included mining out old pillars, which could contain 20000 tons of copper, Mounsey said.
At the closed Chibuluma East and West mines, about 2500 tons of copper in solution could, in principle, be recovered from underground water, and the mines contained about 50000 tons of copper in unmined pillars.
All these opportunities required further investigation and they could "come to nothing", Mounsey warned. They depended on the cost of extraction and prevailing copper prices.
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