China will raise taxes on ores containing zinc, lead, copper and tungsten from Aug. 1, a move that will hit profits at mining and smelting firms.

The size of the tax increase, the first since 1993, would depend on the metal, the official Shanghai Securities News reported on Wednesday, quoting an internal document issued by the finance ministry and tax administration.

"Higher taxes certainly will have a negative impact on us," Pan Qifang, board secretary at Jiangxi Copper Co. Ltd. said, without giving details.
The Hong Kong and Shanghai-listed firm is the country's top copper miner and metal producer by capacity.

Miners will be required to pay taxes of 10 to 20 yuan per tonne of ore containing lead and zinc depending on grades, compared with 3 to 4 yuan set in 1993, according to the newspaper report.

Lead and zinc usually co-exist in ore.

Ores containing copper will be subject to taxes of 5 to 7 yuan per tonne versus 1.4 to 1.6 yuan previously.

Tungsten will face taxes of 7 to 9 yuan per tonne of ore versus 0.5 to 0.6 yuan per tonne.

However, miners in China are likely to pass on part or all of the added cost to smelters as supply of ores does not meet demand in the country.

"China has a larger smelting capacity than mining capacity, so smelters may have to eat up a large part of the increased taxes," Geoffrey Cheng, director at Daiwa Institute of Research (H.K.) Ltd. said.

Mining firms have benefited from record high metals prices over the past two years, with benchmark London Metal Exchange copper touching $8,800 per tonne in May last year.

Lead hit a record high on Tuesday, and zinc peaked in November last year.

Chen Zhixin, chief financial officer at Hunan Nonferrous Metals Corp. Ltd. , said: "There certainly will have an impact. For us, we are not sure yet. We have not calculated it."

The firm is one of China's leading miners of tungsten. Its subsidiary Zhuye Torch is the top zinc producer by production and relies on ores from local and overseas mines. ($1=7.5630 yuan)