KGHM Polska Miedz SA the copper miner with the biggest European mine output dropped to 15 month low after Poland published a draft of the new copper tax bill it plans to implement in 2012.
KGHM lost as much as 13% to PLN 105 in Warsaw, the lowest intraday level since August 31st 2010. The WIG20 Index fell 0.9%. The shares shed 7% after a Bloomberg report that the new levy won’t reduce the base calculating corporate income tax. Poland plans to raise about PLN 1.8 billion from a new copper and silver extraction tax which would be paid by KGHM, Poland’s sole copper producer.
The government confirmed the number in the draft bill published today, saying it expects to raise about PLN 2.2 billion from the tax in the following years. The Finance Ministry set the maximum level of the tax at PLN 32,000per tonne. The limit is based on a monthly average copper price exceeding PLN 52,000 per tonne.
Mr Leszek Iwaszko an analyst at Societe Generale said that “According to my estimates for copper and the zloty dollar rate, the tax will be higher than expected.”
Mr Marek Firlej from the Finance Ministry’s tax policy department said that the new copper won’t be treated as a cost for calculating the corporate income tax.
Below the maximum level, copper producers will pay the tax according to a formula with a lower tax limit set at PLN 130 per tonne when the average monthly price of the metal doesn’t exceed PLN1 3,000 per tonne.
Mr Iwaszko estimates that copper will trade at USD 7,950 per tonne in 2012 with the zloty dollar rate at 3.13. The formula is very progressive. ‘It penalizes the company when the copper price is high and it’s lenient when the price drops. The formula implies eating up about 40% of annual net income in the next 4 years.
Mr Dariusz Wyborski spokesman said that KGHM needs time to analyze the draft and its impact on its strategy. KGHM estimates that the average copper price will be at USD 8,000 per tonne next year.
Mr Tomasz Duda an analyst at Ipopema Securities SA said that ‘‘The progressive formula is triggered at a very low copper price which is very negative news. It means that any KGHM’s profit will be taxed at quite a high rate.’’
(Sourced from Bloomberg.net)
