News / National
Zimbabwe miners propose royalties linked to metal prices
16 Nov 2024 at 14:27hrs | Views
Zimbabwe's Chamber of Mines has put forward a proposal to the Ministry of Finance suggesting that royalty payments be linked to the market prices of metals, including lithium and platinum group metals (PGMs). The proposal, reported by Bloomberg News, aims to cushion mining operations from the impacts of market downturns while still ensuring the government receives a fair share of revenue when prices are high.
In particular, the chamber's recommendations come as the lithium sector faces significant pressures. Lithium, a key component in electric vehicle batteries, saw prices skyrocket in late 2022 but have since dropped due to an oversupply and weakening demand from the electric vehicle market.
The Chamber of Mines argues that the new royalty structure would allow the government to benefit from higher revenue during periods of high lithium prices while providing relief when the prices dip. The mining body expressed concerns about the increased royalty rates in Zimbabwe, especially for newer lithium projects being developed by companies such as China's Chengxin Lithium Group and Sinomine Resource Group. These companies are still grappling with substantial start-up costs and have yet to recover their investments.
"The high royalty has a huge impact on their top line, thereby compromising the viability of lithium projects," the chamber stated.
For PGMs, which are also experiencing price volatility, the Chamber of Mines has proposed a tiered royalty system. Under this system, the royalty rate would be 3.5% for prices up to $1,100 per ounce, rising to 5% for prices between $1,100 and $1,400, 7% for prices between $1,400 and $2,000, and 8.5% for prices above $2,000 per ounce.
The proposal comes in the context of a broader crisis affecting Zimbabwe's mining industry. According to the Chamber of Mines, the sector has lost an estimated $500 million in potential revenue due to production declines driven by power outages. In the first half of the year, Zimbabwe's mineral earnings fell 1.1% to $2.6 billion, with gold output down by 3%, PGMs production dropping 1%, and lithium output slumping 9%.
These financial challenges are compounded by the increasing costs of operating in a difficult economic environment, highlighting the urgent need for policy adjustments that can support both the government's revenue objectives and the survival of the mining sector.
In particular, the chamber's recommendations come as the lithium sector faces significant pressures. Lithium, a key component in electric vehicle batteries, saw prices skyrocket in late 2022 but have since dropped due to an oversupply and weakening demand from the electric vehicle market.
The Chamber of Mines argues that the new royalty structure would allow the government to benefit from higher revenue during periods of high lithium prices while providing relief when the prices dip. The mining body expressed concerns about the increased royalty rates in Zimbabwe, especially for newer lithium projects being developed by companies such as China's Chengxin Lithium Group and Sinomine Resource Group. These companies are still grappling with substantial start-up costs and have yet to recover their investments.
For PGMs, which are also experiencing price volatility, the Chamber of Mines has proposed a tiered royalty system. Under this system, the royalty rate would be 3.5% for prices up to $1,100 per ounce, rising to 5% for prices between $1,100 and $1,400, 7% for prices between $1,400 and $2,000, and 8.5% for prices above $2,000 per ounce.
The proposal comes in the context of a broader crisis affecting Zimbabwe's mining industry. According to the Chamber of Mines, the sector has lost an estimated $500 million in potential revenue due to production declines driven by power outages. In the first half of the year, Zimbabwe's mineral earnings fell 1.1% to $2.6 billion, with gold output down by 3%, PGMs production dropping 1%, and lithium output slumping 9%.
These financial challenges are compounded by the increasing costs of operating in a difficult economic environment, highlighting the urgent need for policy adjustments that can support both the government's revenue objectives and the survival of the mining sector.
Source - zimlive
