Poland's KGHM urges cut in mining tax, eyes mine shut-down on low copper price

Sat Nov 14, 2015 9:59am EST
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CRACOW, Poland Nov 14 (Reuters) - Poland's KGHM, the second-largest copper producer in Europe, on Saturday called for a cut in the domestic tax on miners and flagged a temporary shutdown at one of its overseas mines as copper prices sit at multi-year lows.

Shares in the state-run miner have fallen more than 25 percent this year as concern about growth in China, which consumes half of global copper output, have pushed copper prices below $5,000 a tonne, a level which KGHM says begins to hurt its profits.

Poland implemented a mining tax in 2012. KGHM expects to pay around 1.4 billion zlotys ($355 million) worth of mining levies this year, equal to around 58 percent of the company's 2014 net profit. The incoming conservative government formed by the Law and Justice (PiS) party promised to scrap the tax during the election campaign but has not elaborated on the issue since.

"The levy ... is something natural, but with the current price levels it should be calculated so that it equalled 60 percent of the sum KGHM is currently paying," KGHM chief executive Herbert Wirth told Reuters.

The group has said a weaker zloty helped limit the impact of falling copper prices, which are denominated in dollars, at its Polish mines.

But it also cut 2015 production targets for Sierra Gorda mine in Chile, its main overseas mine, and flagged lower spending and write-downs in the value of its foreign mining assets.

"We are now analysing the situation in all our mines and we see that it is especially hard where we account in dollars," Wirth said.

"That's why at our Robinson mine in the U.S. we have implemented an urgent programme to cut costs by 20 percent. But it may also prove necessary to shut down mining there for a year or two until copper prices rebound."

Robinson is an open-pit mine in Nevada, producing copper, gold and molybdenum. ($1 = 3.9430 zlotys) (Reporting by Wojciech Zurawski; Writing by Adrian Krajewski; Editing by Hugh Lawson)