Do not increase taxes in mining downturns – Paladin
African governments have been urged to resist the temptation to increase taxes during times of mining downturns.
Speaking in Perth, Australia on Wednesday on the first day of the three-day 2013 Paydirt Africa Down Under conference, the Managing Director of Paladin Energy John Borshoff said it was a no-brainer for governments to increase taxes at a time when mining company margins are under pressure.
Paladin Energy owns the Langer Heinrich uranium mine near Swakopmund.
“To us, this is a no-brainer,” Borshoff said. “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. We still have high fixed costs which cannot be reduced, options to defer expenditure and optimise resource.”
He said governments and miners need to work in partnership.
“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.”
During a wide-ranging presentation titled “The changing mood in the global resources sector (what implications for Africa, its miners and developers”, Borshoff said it needs to be understood that the window of opportunity for mine development is often short and can easily be missed. He warned that the climate for exploration, new developments and mine growth has 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. We must respond to the environment which is thrust upon us.” Borshoff said Africa can become even more competitive on a global scale having higher quality mineral deposits and much upside potential, adding that 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. Paladin Energy is a uranium production company with projects currently in Australia, and two operating mines in Namibia and Malawi with a strategy to become a major uranium mining house.