MiningSee 25 February, 2016

Albania chromium mines face closure

After oil extraction companies, mining enterprises also have begun to reduce the level of processing, and even close businesses. Martanesh area, which accounted for about 20 mines have stopped operating. Entrepreneurs complain about the incorrect calculations at the expense of their mineral royalty.

Mineral industry in Albania for months generates only bad news on the economy. Mining companies, who held a meeting with Minister of Economy a few weeks ago, have no news from the steps required by the Ministry of Energy, while news that come from global market prices are increasingly bitter.

In the zone Martanesh, there are about 150 mines that mine chrome. Because of falling prices and heavy tax burden, over 10% of them are estimated to have closed this winter activity. Harsh conditions of weather are among the reasons, highlighted by low prices and tariffs.

Rakip head, one of the entrepreneurs leading in this area shows that other companies are reducing investment and the level of extraction of chromium .

Lowering the price, more than half, it highlighted problems with taxes. Entrepreneurs have recently sought to revise the calculation of the royalty. Currently, it is calculated over a reference price higher than the market price on the final price, including Value Added Tax. In quantities traded not removed nor the level of moisture, which in winter reaches 10% of the amount traded. For all these reasons, according to traders, the raw material goes from 6% to 9% of the price.

Royalty for mineral chromium as reference price today is 6% of the total wholesale price. This level annuity is not based on the price in the international markets (in which traders sell today). Chrome base price has dropped 40% to about 15 thousand per ton. But traders note that for the purpose of royalty, chromium was calculated based on the price of duty in reference to 2012, set by the committee ‘ad hoc’. Chrome base price then was 20,500 leke per tonne. If the current price, the material will arrive with LEK 6123 per tonne, the price of the “old” reference, the price of rent amounts to 9180 ALL per ton. For this reason, traders say that pay 3 thousand more per ton, or a level annuity additional 2 percentage points. So the real annuity varies from 6% to 85%. According to dealers, this difference is more than a year dealing illegally. They demand that the commission “ad hoc” to meet more frequently and to have representatives from the business to update the reference prices.

But the burden of inaccurate estimates do not stop here. All this is visible in the difficult market conditions, which until now, even the traders seem to have been tolerant.

Royalty on the raw material, without giving estimates of the level of humidity. Entrepreneurs say that the humidity is 3-5% chrome and 5-10% for its concentrate. This retention of rent, according to them, contrary to the law and the reference itself, which is rather dry ore royalty on water. “This fact forces us to include humidity customs invoice as income, but only the value of the ore without damp in places where export”, says Head. Due to moisture, traders estimate that approximately 1% pay extra rent. Percentage of rent goes thus 9% of all the total value and not 6% as in law. Martanesh entrepreneurs estimate that the average cost of production of chromium ranging from 12 thousand to 14 thousand per ton. Renta went to 9% “de facto” because the commission did not update the reference prices.

An even more striking case of abuse of the royalty payment is when selling domestically. Law no. National Taxes 9975 for allegedly royalty held by multiplying the value of the tax bill by 6%. So royalty held on the value of VAT, a fact not recognized in other countries.

To make things more functional technical, economists say should be consulted stakeholders in these cases, as they are more efficient with their information on the markets.

Chrome reference price for tax effect is that of 2012 (200 thousand per ton) while the real price dropped below 15 thousand per ton. Customs not exclude moisture from the price of the fruit, not VAT exempt when sold domestically chrome.

One of the most bitter news from the extractive industry came in September, when the only company for extraction, enrichment and export of copper in the country, Beralb, closed activity. The number of workers who lost their jobs was 300. All the fault of low prices that reached the level of production costs. This dimmed any interest to produce, though the company was optimistic at the beginning of the year and had a lot of investment. The value of the chromium (15 thousand per ton) is approaching the cost of production value (12-14 thousand per ton) completely eliminate the risk of opening of mining interest.