Thursday, May 15, 2008

SA Proposing 2.2 - 3.3% Rough Diamond Royalty

Following continuing appeals by some of South Africa’s largest mining firms, the National Treasury agreed to adjust the way it calculates new mining taxes, Bloomberg reports.

Royalty rates on rough diamonds and other unrefined products will be 2.2 to 3.3 percent with a levy of as much as 7 percent, the Treasury said Tuesday in a written submission to parliament.

Last March, diamond miner De Beers warned that the company would be subjected to an “unfair form of double taxation,” affecting the Finsch diamond mine, due to the combined new draft of the Royalty Bill with the Mineral and Petroleum Resources Development Act.

The Ministry of Mines and Energy has rejected De Beers’ assertion.

In recent weeks multi commodity miner Anglo American and other mining companies warned that the royalty could deter investment.

In general, royalty rates will range from 0.5 percent to 7 percent of sales, after certain costs, and will depend on what miners produce as well as profitability, the Treasury announced.

The tax on refined products such as gold will range between 1.7 and 2.5 percent, with a 5 percent cap.

The new tax formula will allow depreciation and amortization to be deducted.

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