Gold News

Mining royalties law 'may hit gold production'

Gold prices may increase further if claims that a new mining royalties law in South Africa will negatively affect gold output are to be believed.

Reuters reports that the country's Chamber of Mines (CoM) said in a submission to parliament today (March 11th), that mining production in the nation - which has already been impacted by power problems - could reduce investment in mining as a result of firms having to pay more in royalties because of the bill.

The comments came after the CoM issued statistics that showed South African gold production fell by 7.4 per cent in 2007. Output has been on a downward trend in the country for some time, helping to increase the price of gold bullion in the process.

If approved, the mineral and petroleum resources royalty bill could accelerate this decline, as it is believed that miners could be paying out "significantly" higher royalty rates by 2011 compared with the fixed rate proposals put forward by the national treasury in 2006, according to the CoM.

"The impact on the gold sector will mean the sector will pay royalties up to some three times higher than the 1.5 per cent fixed rate from the second draft," it commented.

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