UPDATE 2-Zambia to reduce underground mining royalties to 6 pct

Fri Jun 5, 2015 2:24pm EDT
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(Adds comment from Vedanta CEO)

By Chris Mfula

LUSAKA, June 5 (Reuters) - Zambia's government will cut mineral royalties for underground mines to 6 percent, lower than the 9 percent expected to take effect on July 1, the presidency said on Friday.

It marks a second retreat from higher rates since Africa's second-largest copper producer decided in January to raise royalties. That decision rankled mining companies and unions and forced the government to review its plan.

"Mineral royalty tax will be reduced to 6 percent from the earlier proposed 9 percent. It will remain at 9 percent for open pit mines," presidential spokesman Amos Chanda said.

Zambia set the royalty rate for open pit and underground mining at 9 percent in April, rowing back from earlier plans to charge as much as 20 percent.

"We welcome this move by the government," said Tom Albanese, chief executive of Vedanta Resources Plc.

"The reduced royalty recognises the higher costs associated with Zambia's deeper mines, especially given the high electricity and water pumping costs."

Vedanta's Zambian copper unit, Konkola Copper Mines, runs an open pit and underground mine along with a copper smelting plant.

Miners operating in Zambia include Glencore, Barrick Gold Corp and First Quantum Minerals. (Additional reporting by Silvia Antonioli in London, Soumithri Mamidipudi in Bengaluru and Susan Taylor in Canada; Writing by Mfuneko Toyana; Editing by James Macharia, Toni Reinhold)