The piece “Globe Metals & Mining wants royalties scraped as negotiates Agreement with Malawi” featured below was initially published in Malawi’s Mining & Trade Review Issue Number 30 that is circulating this October 2015.

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

Kanyika negotiations

…Globe wants royalties scraped out

ASX listed Globe Metals & Mining which is negotiating for a development agreement with the Malawi Government for the Kanyika Niobium Project in Northern Malawi has proposed to the Malawi Government to come up with a taxation arrangement that does away with payment of royalties by mining companies.

Globe Metals & Mining Managing Director, Neville Huxham, tells Mining & Trade Review that the system of paying royalties is outdated and meaningless in the modern mining era as it originated from the old century UK where mining companies paid mineral royalties to the king.

What we are saying is that Malawi must come up with a proper tax rate for the mining sector. It is double taxation to subject mining companies to payment of royalties and tax as is the current case because a royalty on its own is another tax. In the old British Empire, miners were paying royalties to the King. Who are we paying royalties to in a modern democratic state?

questions Huxham.

Malawi’s fiscal regime as stipulated in the Mines and Minerals Act (1981) and Taxation Act gives the mandate to the government to negotiate on the specified royalty rates, which are 5% generally or 10% for export of rough uncut precious and semi-precious stones, and 7% for export of unprocessed industrial minerals.

The royalties are paid based on gross sales value less transport costs to point of sale.

The laws also subject mining projects to a fixed income tax of 30%.

For a modern economic set up, payment of taxes is adequate. Countries have to stop embracing colonialism by forcing mining companies to pay royalties,

says Huxham.

Malawi’s royalty rate is said to be the highest in the Africa region whose average is pegged at 3%.

Consequently, the Government reduced the royalty rate for Paladin Africa in the development agreement for the Kayelekera Uranium Mine in Karonga to 3% in exchange of 15% government shareholding in the investment.

Globe Metals submitted a draft development agreement to the Malawi Government, which is a replica of the Kayelekera development agreement, and the government is dilly-dallying to approve it as it wants the investor to pay the taxes and royalties as stipulated in the laws.

The Kanyika Niobium Mine will become the largest mining investment in Malawi after Kayelekera, which Paladin mothballed due to low uranium prices on the global market.

Globe Metals, which has China Mineral Exploration and Development Bureau as a major shareholder for the Kanyika Project, is expected to pump US$450-million into the development of the Kanyika Mine.