Zambia Mining Report Q2 2016
BMI View: Zambia's mining royalty reversal will support the sector's investment outlook. However, bothlow copper and coal prices and the country's high degree of mineral policy uncertainty will continue tolimit the sector's production growth until the country's Presidential elections in 2016.
Latest Developments & Structural Trends
Mineral policy uncertainty will continue to hurt the sector's growth. Although the April 20, 2015downwards royalty tax revision is positive news for miners, mineral policy uncertainty will limit a shareof investors from entering the sector. The new royalty tax will come into effect on July 1 2015 and willcut royalties on open pit mining from 20.0% to 9.0%. The downwards revision supports our view that theroyalty tax would be unsustainable in its current form (see 'Tax Moderation On The Cards', January 9).
The current Zambian President, Edward Lungu, was narrowly elected on a populist platform in January2015, hence his reaffirmation of the previous mining royalty tax. However, with the April 2015 slashingof the mining tax, Lungu has backpedalled on his populist stance. As a result, we expect mineral royaltiesto become a hot topic for the upcoming 2016 Presidential election and for mining policy uncertainty toremain high.
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