The Restructuring of the Mineral Royalty Payment Regime on Copper

What is Mineral Royalty Tax?
In section 2 (1) of the Mines Act, Mineral Royalty Tax (MRT) is defined as a payment received as consideration for the extraction of minerals. Unser section 89 of the Mines Act, the following are liable to pay to MRT:

1. Holders of the following mining rights and licenses:
   – Large-scale mining license;
   – Large-scale gemstone license;
   – Small-scale mining license;
   – Small-scale gemstone license;
   – Artisan’s mining right, and
   – Mineral trading permit
2. Any person without a mining right, but in possession of minerals extracted from Zambia on which the supplier of the minerals has not paid mineral royalty.
3. All persons carrying out the quarrying of industrial minerals include the quarrying of gravel, clay and sand.
4. All persons that mine minerals for use as inputs or raw materials in their manufacturing process for example cement and lime manufacturers.

Mineral Royalty Tax in Respect of Copper Under the Mines Act
Prior to the Amendment Act, section 89 (2) of the Mines Act, prescribed the following MRT rates where the base metal produced or recoverable under the license is Copper:

1. 5.5% of the norm value when the norm price of Copper is less than USD 4,500 per ton;
2. 6.5% of the norm value when the norm price of Copper is USD 4,500 or higher per ton but less than USD 6,000 per ton;
3. 7.5% of the norm value when the norm price of Copper is USD 6,000 or higher per ton but less than USD 7,500 per ton;
4. 8.5% of the norm value when the norm price of Copper is USD 7,500 or higher per ton but less than USD 9,000 per ton; and
5. 10% of the norm value when the norm price of Copper is USD 9,000 or higher per ton.

Mineral Royalty Tax in Respect of Copper under the Amendment Act
Following the Amendment Act, where the base metal produced or recoverable under the license is Copper, the MRT payable is applied at an incremental value in each price range at the rates set out below:

1. 4% of the norm value when the norm price of Copper is less than USD 4,000 per ton;
2. 6.5% of the norm value when the norm price of Copper is USD 4,000 or higher per ton, but less than USD 5,000 per ton;
3. 8.5% of the norm value when the norm price of Copper is USD 5,000 or higher per ton, but less than USD 7,000 per ton; and
4. 10% of the norm value when the norm price of Copper is USD 7,000 or higher per ton.

The norm value of the Mines Act has been benchmarked against the monthly average London Metal Exchange cash price per ton multiplied by the quantity of the metal.

Conclusion
This legal alert has set out the amendments to the Mines Act brought about by the Amendment Act.

Should you have any questions on the amendments to the Mines Act, please do not hesitate to contact Arshad Dudhia.

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Contributors
1. Samuel Muleya – Legal Assistant