Monday, 23rd October 2006 (2893 views)

The third largest gold producer in Africa, Harmony Gold Mining, could be the most severely affected company due to new South African legislations says Merrill Lynch.

South African government is proposing to introduce a tax on the revenue from gold mines with AngloGold Ashanti and Gold Fields also expected to be hard hit by the bill.

The royalties bill has received a second draft and under its terms, a 1.5 per cent levy will be expected on any sales by producers of refined gold.

In a statement, Merrill Lynch explained: "Harmony with more than 90 per cent exposure to South African assets is likely to be the most affected."

Marginal mines will be subject to a lower level of tax and Merrill Lynch stated that this reduced tax rate could apply to some of Harmony Gold Mining's properties.

The company announced that gold production reached three million ounces in 2005 and this came predominantly from South African mines.

South Africa is not the only African country attempting to raise its royalty tax. Zambia plans to raise its taxation on mining companies from 0.6 per cent to around 2.5 per cent.

 

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