COPPER: Tax changes force Barrick to shut down Lumwana

ZAMBIA – Following the passage of legislation that raises the royalty rate on open pit mines in Zambia to 20% from 6%, Barrick Gold of Toronto has announced the closing of its Lumwana copper mine in that country. The new law eliminates corporate income tax, but the royalty will be levied regardless of profitability.

"The introduction of this royalty has left us with no choice but to initiate the process of suspending operations at Lumwana. 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 co-president Kelvin Dushnisky.

"We sincerely regret the impact this will have on our people, as well as the communities and the businesses that depend on Lumwana, and we remain hopeful that the government will consider an alternative solution that will allow the mine to continue operating," said co-president Jim Gowans.

Lumwana produced 260 million lb of copper in 2013, and 138 million lb in the first nine months of 2014 at C3 fully allocated costs of US$2.98 per lb. It supported 4,000 direct jobs. Barrick will be making major workforce reductions at Lumwana beginning in March 2015. The transition to care and maintenance is expected to be complete in the second quarter next year.

Barrick warned that it will take an impairment charge of roughly US$1 billion related to Lumwana in Q4 2014. Find more information at Barrick.com.