African governments must not increase taxes during downturns in mining

CONFERENCE CALLER: African governments of all persuasions must resist the temptation to increase taxes during times of mining downturn.

That was the blunt message from Paladin Energy managing director John Borshoff, speaking in Perth on the first day of the 2013 Paydirt Africa Down Under conference.

“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.

“Government 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 needed to be understood that the window of opportunity for mine development is often short and can easily be missed.

And he 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” he said.

“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.

“African 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.

“Just remember, a mine is like an iceberg – 90 per cent of its benefit lies beneath.

“The top 10 per cent is the profit, but the other 90 per cent 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).