UPDATE 1-Zambia may be backing off steeper mine royalty rates -Barrick

Thu Oct 30, 2014 11:59am EDT
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(Adds details, background on Zambia, China appointment, debt target)

By Nicole Mordant

Oct 30 (Reuters) - There are indications Zambia may be backing away from plans to impose a 20 percent royalty rate on open pit mining in the country, a top executive with Barrick Gold Corp said on Thursday.

Zambia's Finance Minister Alexander Chikwanda rattled mining companies with investments in the copper-rich southern African country earlier this month when he announced that from January royalties on open pit mines will rise to 20 percent and on underground mines to 8 percent from 6 percent currently.

Barrick, which is the world's biggest gold producer but also owns the Lumwana copper mine in Zambia, has said that a 20 percent royalty would seriously challenge the economics of the large open-pit mine.

"Our sense is that the government realizes that the numbers they have imposed will be very challenging for the industry," Barrick co-president Kelvin Dushnisky said on a conference call to discuss the company's third-quarter results, which were released late on Wednesday and beat market expectations.

"I don't want to handicap anything, but going into this week, our sense is there would be movement away from that number. I can't guarantee it but that's certainly the direction discussions were going," he said.

The death this week of Zambia's 77-year-old president Michael Sata, and a period of national mourning, could impact the timing of the new regulations, which were due to come into effect on Jan. 1, 2015, Dushnisky said.