Investigating the impact of mineral royalty fiscal (1)

Zambia’s mining industry has undergone various phases of mineral royalty changes since privatisation. Unlike many analyses that relied on subjective probability, this study employs the cut-off grade and mineral royalty model relationship to investigate how changes in mineral royalties impacted the net present value and cut-off grades of Zambian copper mines between 2008 and 2022. The results showed that net present value decreased by 10.39%, 6.13%, 9.69%, and 6.13% for Barrick Lumwana, Kansanshi, Nkana–Mopani Copper Mines, and Mufulira–Mopani Copper Mines, respectively, while First Quantum Minerals Trident’s net present value increased by 3.40%. Reductions in NPV correspond to higher government revenue, whereas the increase for FQM Trident reduced government revenue. For cut-off grades, returns increased by 0.42%, 1.20%, and 0.42% for Barrick Lumwana, First Quantum Minerals’ Trident, and Kansanshi, respectively, showing how portions of the Zambian copper orebodies accrued to investors, with a corresponding reduction in government revenue. Conversely, reductions of 0.24% and 0.38% for Nkana–Mopani Copper Mines and Mufulira–Mopani Copper Mines indicated that a share of the reserves accrued to the government, reducing investor returns. These findings demonstrate that mineral royalty adjustments redistribute economic value between investors and the government, affecting both profit margins and operational decisions. Besides distributional effects, all projects remained economically viable. The findings underscore the need for an optimal mineral royalty framework that equitably balance.