The temptation to increase taxes during a mining downturn needs to be resisted by African governments; instead governments and miners need to work in partnership.
This was the blunt message from Paladin Energy MD, John Borshoff. He was delivering his presentation, titled “The changing mood in the global resources sector (what implications for Africa, its miners and developers”, at the Perth 2013 Paydirt Africa Down Under Conference.
He said: “To us, this is a no brainer. We understand why the temptation exists – to increase taxes during mining downturn to retain revenue streams, but it is during these hard times with low commodity prices that miners have already cut costs where possible – just to survive.
He said that miners still have high fixed costs which cannot be reduced, options to defer expenditure and optimise resource. “We need to learn to ride out the poor season, recognising the key benefit from a mine is from the relatively constant cost of production and the ‘revenue’ thus derived to the local economy.
“In this case, profit based royalties can be fairer and can help preserve a mining operations during bad times and can provide higher revenue to government during good times.”
Borshoff said it needed to be understood that the window of opportunity for mine development is often short and can easily be missed. He also warned the climate for exploration, new developments and mine growth had changed. “It’s not summer time anymore, but hopefully it’s not winter either – But we are in a tougher season. Mines are becoming marginal with lower commodity prices (gold, uranium, nickel, rare earths, etc and we must respond to the environment which is thrust upon us.’
He said Africa can become even more competitive on a global scale having higher quality mineral deposits and much upside potential. “Paladin will continue its commitment through good times and tough times to the African continent, and be ready to expand its operations with an upturn in uranium price.”
He said a mine is like an iceberg – 90% cent of its benefit lies beneath. “The top 10% is the profit, but the other 90% is the engine room of the entire operation. Africa must do all that is can to ensure it supports as many mines as possible.”
Paladin Energy is a uranium production company with projects currently in Australia, and two operating mines in Africa (Namibia and Malawi) with a strategy to become a major uranium mining house.
Paydirt 2013 Africa Down Under Conference is Australia’s largest mining conference, and kicked off on Wednesday, in Perth, Australia. A showcase for the $40 billion investment to date by Australian mining companies, explorers and suppliers, in co-developing Africa’s vast mineral wealth and its mining industry – and largest gathering in the world of Federal and African resources ministers and business heads outside of the African continent – the three day conference runs over two hotel venues in the Perth CBD.
The intense Conference programme, which has attracted at least three Federal Ministers and up to 16 African mining ministers, including prominent South African Minister, Susan Shabangu.