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This World-Leading Copper Resource Is Getting A Tax Break

Very welcome news yesterday for one of the world's largest copper mining districts.

That's the Kupferschiefer of Poland -- a deposit that produces 425,000 tonnes of copper metal yearly.

Not one but two of Poland's leading political parties came out in support of cutting taxes for mining in the Kupferschiefer. Making it look all but assured that at least some operations here are going to get more profitable, very quickly. Related: Saudis Expand Price War Downstream

The prospect of tax reforms in the Kupferschiefer was kicked off by the country's Law & Justice political party. Which said on its Twitter account that it was planning to make a motion to "cancel the copper tax".

The copper tax in this case is a 2012 initiative introduced by the Polish government, imposing additional taxes on copper (and silver) mining from the Kupferschiefer. Which were applied at a sliding-scale that ranged up to 35%.

The unpopular move caused a number of smaller projects in Poland to halt. And had a notable financial impact on the country's biggest miner, state-controlled KGHM. Related: 9 Reasons Why We Should Be More Worried About Low Oil Prices

But with copper prices subsiding, officials now seem to be moving to support KGHM. With the Law & Justice party saying that the company's profits are "falling radically".

The endorsement from Law & Justice is a critical one. Because the party is currently leading polls for the October 25 general election in Poland.

But the current government also appears to be favoring a tax cut. With the country's Prime Minister Ewa Kopacz saying yesterday that officials must "analyze" KGHM's tax structure. Related: Oil Price Rout Set To Inflict Real Pain On Russia

That follows on comments last week from Poland's Treasury Minister Andrzej Czerwinski, noting that the government may have "some good news" for KGHM soon.

The critical thing here will be to see whether potential tax cuts apply just to KGHM -- or whether they will be extended to the entire Polish mining sector. If the latter proves to be the case, we could see a resurgence of new project activity here, continuing a trend that was getting in motion three years ago, before the new tax was imposed.

Here's to giving them a break,

Dave Forest

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