Less copper extracted means less spending on local inputs and less tax revenue received. Some of the technical studies conducted by mining companies perform after-tax evaluations, whereby a crude projection of taxes owed over the project’s life is made. From the selection of projects in the sample that perform tax calculations, we have estimated that there is a reasonably close relationship between copper in reserves and cumulative projected tax revenue over the life of a project, as shown in Figure 27. The larger the mine, the higher the expected tax payment to the host government.

Returning to Kamoa-Kakula, the tax implications of the high-grading being conducted at this project are significant. The company estimates it will pay US$25.7 billion in income taxes, customs duties, royalties, and exports taxes to the DRC government over the project’s 37-year life (Ibid. p 561, p 564). If the operator had selected a 1% cutoff grade for its mining operation instead of 2.5%, hence mining at 2.6% copper (Ibid. p 18) instead of 3.88% copper (Ibid. p 5), it could extract 26.2 million more tonnes of copper and pay at least an additional US$38.5 billion in revenues over the life of the mine.

# Conclusion

This paper’s title is “Maximizing Output and Government Revenues from Mining in Developing Countries: The Role of Country Political Risk and Investors’ Return, and Implications for the Energy Transition.” There are four messages on these topics. The first is that political risk seems to directly impact mining companies’ preferences through their selection of countries in which to explore in the first place. Zambia’s copper mining economics, as measured by mining costs, are on par with Chile. As a result, the projects that Zambia has managed to develop have copper cutoff grades equivalent to those in Chile. Yet Zambia has attracted only a small fraction of the exploration spending and general project activity compared with Chile, despite the sizes of the two countries being comparable. A confounding factor is that Zambia has not conducted a geological survey, which means that companies will only explore in regions that have yielded success in the past. One cannot disentangle the impact of lack of geological survey from political risk.

The second and most important message is that maximizing government revenues from mining is best achieved by encouraging exploration. It is the seed from which mining projects emerge: more exploration results in more projects being found and developed, and more projects being found and developed results in more taxation being received by the government. Notions of increasing fiscal receipts from mining – by, say, implementing special resource rent taxes on existing projects, or special mining taxes on top of corporate taxes, or anticipating increased fiscal revenues as metal prices rise – is of second-order importance. Taking an intertemporal and project lifetime cash-flow approach, there is very little resource rent that has been left untaxed in the first place, and any attempt to increase mining taxation on all projects will likely lead to less exploration, not more. Increased taxation rates should likely be limited to projects that are extraordinary in their resource size and quality. So far, despite the green energy revolution, we are not seeing an increase in metal prices; we are, however, seeing a rapid inflation of mining costs that reduces the tax base. What will lead to more exploration is a national geological survey that maps the countries’ areas of mineral potential, an effective and efficient exploration and mining permitting system, security of land tenure, and stability of fiscal regime. These are the steps that successful mining countries like Canada and Chile have pursued, and that Botswana is using to attract companies to its newly developed Kalahari copper belt.

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