At a conference held on November 4th in Cracow, The Technology and Innovation Highway Institute presented the results of an analysis of the impact of the 2012 tax on some minerals on the rationality of resource management – a topic often neglected in public debate.
In the case of some mines owned by KGHM Polska Miedź S.A., the total tax burden resulting from the aforementioned tax amounted to 30-45 percent of the production value, depending on the branch. As a result, some divisions have recorded losses. The analysis emphasized that as a direct consequence of the tax some resources may not be seen as economically feasible for mining. Estimations indicated that 13.4 percent of industrial resources could be lost, as they would be seen as unfit for mining on economic grounds. This figure is the equivalent of average five-year mining at KGHM.
– We estimate losses resulting from the possible withdrawal from mining some of the economically unfeasible resources to be in the region of 28 mln PLN – assessed prof. Joanna Kulczycka, professor at the University of Science and Technology in Cracow, Director of the Strategic Research Department at the Mineral and Energy Economy Research Institute of the Polish Academy of Sciences. Should KGHM decide to decrease the mining of the resources adjudged to be economically risky, the beneficiaries of the exploitation fees and the Treasury will also lose (the so-called “non-fixed payment for mining exploitation) – a total of almost 0.7 bln PLN.
– Examinations have shown that a copper content of less than 1.2 percent of the ore qualified the resource as vulnerable: that is, one the mining of which is not economically reasonable in light of current tax rates – Kulczycka emphasized.
Participants pointed out the existence of mechanisms for decreasing tax burdens so that investors may rationally mine different resources.
– The lack of any flexibility whatsoever in this regard on the part of the owner of the resources – the Treasury – may lead to an irrational management of resources and a failure to take advantage of the benefits of mining them – summarized Jacek Jezierski PhD, former Chief National Geologist and Viceminister of Environment.
The participants agreed that the Minister of Environment has a particularly important role to play in securing conditions conducive to rational mining, as he is the institution issuing permits and is also responsible for the management of Poland’s mineral resources.
According to preliminary assessments, with the current mechanism of calculating the copper tax, the estimated economically unfeasible resources in vulnerable mines would increase non-industrial resources by 67 percent. This means that there is a threat of a sizeable part of balance resources remaining unmined.
A mechanism making it possible for a mine declared vulnerable to be entitled to suspend the tax obligation was suggested as a possible solution. The actual value would be verified at the time of mining and confirmed with appropriate scientific tests. – The objective of such a mechanism is to ensure rational resource management and protection, which is why such suggestions should be directed as the Minister of Environment as the entity conducting a concession policy – Jezierski stressed.
Participants agreed that after thorough analyses the concept detailed above should serve as the basis for an amendment of the act on mineral resources.