Canada’s
Barrick Gold (NYSE:ABX)(TSX:ABX) said Thursday it will suspend operations at
its Lumwana copper mine in Zambia, after the country increased this week mining
royalties from 6% to 20%.
The
world’s largest gold producer said the new tax regime, expected to go into
effect on Jan.1, left the company “no choice” but to initiate the process of
halting operations at its open pit mine.
“Despite the progress we have made to reduce
costs and improve efficiency at the mine, the economics of an operation such as
Lumwana cannot support a 20% gross royalty, particularly in the current copper
price environment," said Barrick’s co-President Kelvin Dushnisky.
Major
job cuts at the mine, which employs about 4,000 people directly, are planned to
begin in March
Major
job cuts at the mine, which employs about 4,000 people directly, are planned to
begin in March, following the legally required notice period for putting the
mine in care and maintenance, Barrick said.
The
Toronto-based company also revealed it expects to record an impairment charge
related to Lumwana, acquired when it bought Equinox Minerals Ltd. in 2011, in
the fourth quarter of this year.
All
operations at Lumwana, located in Zambia's Northwestern Province, should be
fully cancelled by the second quarter of 2015, Barrick added.
The
Southern Africa nation is one of the world's key copper producers and Barrick's
decision to shut Lumwana makes the miner the first to react to Zambia’s new
royalty rates.
In
the first nine months of this year, the mine produced 138 million pounds of
copper at C3 fully allocated costs of $2.98 per pound. The mine had 6.6 billion
pounds of copper in reserves as of December 31, 2013.
Barrick
had warned in October that it would consider suspending the mine if the Zambian
government didn’t change the proposed new tax system, as it would threaten the
operation’s viability.
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