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Barrick Gold Sells Zambian Copper Mine in Light of New ‘Risky’ Tax System

Zambian copper mine Lumwana, owned by the second largest bullion miner in the world –Barrick Gold Corp – is being offered for sale in the second half of 2019. The company announced that it plans to shed $1.5 billion of mines that have little expansion potential as their low-grade character, in combination with Zambia’s new mining code and import duty, make the mine even less productive.

The value of Lumwana is estimated at up to $500 million. Barrick currently holds discussions with investment banks and two sources confirmed that a bank linked to Chinese business interests is most likely to get the advising role for Lumwana. Although Barrick has not commented on the situation, it implied that talks with Chinese state-owned companies including Aluminum Corp of China (Chinalco) and China Minmetals Corporationare can’t be ruled out.

However, the sale is not expected to be easy because of risks coming with new tax changes in Zambia. Specifically, the tax plan is to enforce a new 5% copper import duty, replace the value-added tax with a non-refundable sales tax in an attempt to keep a greater share of mineral resource profits for the country, and also implement a royalty on copper production. As there is a global need for copper resources from the region, Zambia hopes the tax would tackle the country’s debt.

Barrick also claims an interest in future investment in the region. The company considers assets, including copper and gold, or pure copper projects, to be especially attractive under certain conditions. Meanwhile, the closing of a $6.1 billion acquisition of African miner Randgold Resources and consequent investment in a joint venture with rival Newmont Goldcorp to combine operations in Nevada suggests a possible attempt to form the world’s biggest gold complex.

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