Diamond mining companies in Zimbabwe are lobbying for a further reduction in royalties, a report from a recent mining survey shows, as miners look at ramping up production. Mining executives surveyed said at 10 percent, the royalty rate for diamond miners was “still the highest in the world..
Government reduced the diamond royalty rate in 2019 to 10 percent from 15 percent after the companies complained over huge extraction costs resulting from a shift from alluvial to conglomerate diamond mining, which fetches more dollars but is more expensive to extract.
“Diamond producer respondents indicated that the diamond royalty at 10 percent is still the highest in the world and is undermining the viability of producers,” said the survey, urging the Government to cut the rate in line with best practices.
Chamber of Mines of Zimbabwe chief executive Isaac Kwesu told The Herald Finance & Business that the royalty rate of the diamond industry “was too steep for investors”, urging the Government to offer more incentives to encourage investments.
“In most cases, the investors become impatient and take their money elsewhere,” he said. “We encourage taxes that support investors and not penalise them.”
Russia’s Alrosa and Anjin are among diamond producers operating in the country.
The diamond industry plea comes as local platinum producers have raised concerns over the beneficiation tax framework to be re-introduced effective January 1, 2022.
Platinum miners are lobbying for tax holidays on beneficiation projects to stimulate investments into the sector. Lithium producers have also made similar requests, arguing the current tax beneficiation framework was discouraging investments into the value addition facilities.
Zimbabwe’s economic blueprint, the National Development Strategy 1 (NDS1) says the re-introduction of a “beneficiation tax” on unprocessed base metals is meant to push miners to set up a value addition to discourage the exports of concentrates and matte.
It said the local mining sector will enhance its beneficiation and value addition strategy through five key minerals namely gold, PGMs, diamonds, coal, and chrome. While 10 percent of all locally produced diamonds are earmarked for local beneficiation, only about 0,5 percent are being cut and polished in the country, it said in the NDS1.
Cut and polished diamonds are estimated to bring about an 8 percent increase in value compared to the exportation of raw diamonds, hence, the NDS1 will seek to increase the level of locally cut and polished diamonds from 0.5 percent to 5 percent by 2025.