De Beers Warns Legislation Could Negatively Affect Finsch Mine

In a submission made Tuesday to the South African Parliamentary Portfolio Committee on Finance, De Beers argued that the third draft of the Royalty Bill will amount to an “unfair form of double taxation,” specifically affecting the company’s Finsch mine.  

As part of the submission, De Beers warned that the Royalty Bill, along with the Mineral and Petroleum Resources Development Act, “might lead to decisions against further expansion of the mine as well as a danger of premature closure (possibly as early as 2015), which will in turn result in a loss of tax revenue for government, potential job losses and a detrimental impact on the local economy in the Finsch mine area.”

A De Beers Consolidated Mines director, Barend Petersen, explained to a joint meeting of the parliament’s finance and minerals and energy committees that the Finsch mine is DBCM’s only South African operation that would be affected by the legislation.

As an illustration, the submission referred to the Finsch mine to show the potential duty imposition the legislation would enact: “The imposition of a royalty in addition to any lease consideration that remains payable…in the case of the Finsch mine would for the period 2009 to 2014 be roughly equivalent to a gross revenue royalty of eleven percent over that same period.”

De Beers said that it was previously assured in discussions held with the Treasury that such double taxation was an oversight in previous editions of the legislation and that it was not intended. “It is our submission,” said Petersen, “that this is a technical oversight.”

The company suggested that this section of the law under discussion should be repealed accordingly or amended clearly to avoid the double taxation.