ZIMBABWEAN gold miner Caledonia Mining Corp. said on Monday it was assessing the impact of proposed doubling in the royalty rate unveiled in the Southern Africa country’s National Budget on November 27.
Gold miners will pay a 10% royalty when prices exceed $2,501 per ounce and are part of broader revenue measures designed to boost state income and support domestic industry, said Reuters of National Budget.
“In order to ensure the mining sector contributes a fair share of revenue to the Fiscus during periods of commodity price boom, as well as eliminate arbitrage between categories of miners, I propose to harmonise and review the royalty structure for all gold producers,” Finance Minister Mthuli Ncube stated in the speech.
“The royalty will now be linked to the price level or price category,” he was quoted as saying in an article by Bloomberg News. Under the proposed changes, a tax of between 3% to 10% will be applied, depending on the price per ounce of gold.
“The company is assessing the implications of the proposed changes for its portfolio of assets, including in particular the potential effects on the recently announced economics of the Bilboes Gold Project,” said Caledonia CEO Mark Learmonth in a statement.
He warned of a “lower level of profitability and cash generation relative to current market expectations” at Blanket mine, Caledonia’s 80,000 oz/year operation. Part of the cash flow from Blanket would be used to finance the proposed $484m Bilboes project.
Speaking last month following the unveiling of the 200,000 oz/year project, Learmonth said Bilboes would reclaim Zimbabwe’s place as a gold mining destination.
“Bilboes should deliver substantial benefits to Zimbabwe: a project of this scale should help Zimbabwe to reclaim its position as a major gold destination in the eyes of the international investment community,” he said.
Commenting today, Learmonth said: “Caledonia has a long-standing operating presence in Zimbabwe and continues to engage constructively with the relevant authorities,” said Learmonth. “The company will provide a further update once more clarity is available”.
