Prospect Lithium Zimbabwe (PLZ) has proposed a three-tier royalty system for lithium that would retain the current 7% rate on raw ore and concentrates but reduce royalties for progressively higher levels of local processing, in a bid to encourage deeper beneficiation and attract further investment into Zimbabwe’s lithium value chain, Mining Zimbabwe can report.
By Rudairo Mapuranga
The proposal was presented to the Parliamentary Portfolio Committee on Mines and Mining Development. Under the proposal, lithium sulphate would attract a royalty of about 5%, while higher-value chemical salts capable of feeding directly into battery manufacturing would attract a rate of approximately 3%.
PLZ Commercial Manager Leo Huizenga made the proposal during the Committee’s fact-finding visit to the Arcadia lithium project, arguing that a graduated system would give companies greater incentive to invest capital in local processing rather than exporting concentrates.
“One of the proposals that we have is to replace the current flat royalty rate with a graduated system,” Huizenga said.
He said a similar approach had been used in the platinum industry and could encourage additional investment in Zimbabwe’s lithium sector.
7% for concentrates, 5% for sulphate and 3% for higher-value products
Under PLZ’s proposed model, the current 7% royalty would remain applicable to raw ore or concentrates.
Huizenga said retaining the higher rate at the concentrate stage would discourage companies from exporting concentrates and encourage further local beneficiation.
“The second proposed level would be to have a rate of around 5% for lithium sulphate,” he said.
According to Huizenga, the lower royalty at the sulphate stage would provide companies with additional capital to invest in domestic refining capacity, industrial infrastructure and processing jobs.
“Basically, if you lower the rate of royalty, it will give the local companies more capital to invest locally,” he said.
The third tier would apply to companies taking lithium processing further into high-value chemical salts that can feed directly into the battery manufacturing chain.
PLZ proposed a royalty rate of approximately 3% at that stage.
Huizenga said the objective would be to encourage production of higher-value materials and position Zimbabwe more firmly within the global battery supply chain.
The proposal would effectively make the royalty burden progressively lower as companies move further up the value chain, creating a financial incentive for deeper local processing.
PLZ raises ZiG tax-payment challenge
Alongside the royalty proposal, PLZ raised concerns over the currency composition of its tax obligations, arguing that the mismatch between its Zimbabwe-dollar receipts and foreign-currency tax obligations is creating a significant financial burden.
Huizenga told the Committee that approximately 30% of PLZ’s revenues were received in ZiG, while the company was required to pay about 84% of its taxes in foreign currency.
The company argues that the disparity leaves it accumulating ZiG balances that are difficult to deploy because many of its imported inputs and other costs require foreign currency.
“Our company gets 30% of its revenues in ZiG… Yet, we are having to pay approximately 84% of our taxes in foreign currency,” Huizenga said.
He argued that allowing companies such as PLZ to settle a greater portion of their tax liabilities in ZiG would reduce the mismatch.
“Enabling us to pay our taxes in ZiG will relieve us of a major, major burden,” he said.
Huizenga also called on Government to lead by example by accepting ZiG for tax payments while businesses continue to face difficulties getting suppliers to accept the local currency.
The issue highlights a broader challenge for Zimbabwean companies that earn part of their revenues in local currency but require foreign currency for imported machinery, equipment, chemicals and other production inputs.
PLZ challenges tax treatment of export charges
The company also raised concerns over what it described as double taxation arising from the treatment of export taxes and levies for income-tax purposes.
Huizenga said PLZ pays a 10% export tax and a 3% export levy, but the two charges are not deductible when calculating income tax.
The company is consequently taxed on income that has already been subjected to the two export charges, according to Huizenga.
“We pay these, but they are not deductible. We are then charged income tax on top of these,” he said.
Huizenga argued that the treatment effectively increases the combined burden from 13% to approximately 16.25%, assuming the 25% income tax rate is subsequently applied to the non-deductible charges.
PLZ is therefore asking the Ministry of Finance to allow the export taxes and levy to be treated as deductible expenses for income-tax purposes.
“This adjustment will mitigate double taxation, improve export cash flows, and bolster the global competitiveness of local industries,” Huizenga said.
He also warned that the tax treatment could affect Zimbabwe’s competitiveness for lithium investment compared with other mineral-producing jurisdictions, including the Democratic Republic of Congo.
“Zimbabwe has to compete with countries such as the DRC for investment in the lithium industry,” he said.
Beneficiation investment already underway
The fiscal proposals come as PLZ and its subsidiary, Arcadia Technology Zimbabwe (ATZ), continue to invest in local beneficiation.
Huizenga said the group had invested approximately US$400 million in beneficiation facilities and had paid more than US$100 million in taxes and royalties.
The company’s lithium sulphate plant was commissioned in December 2025 and is now operational, with what Huizenga described as stable output.
The company has also established an on-site laboratory to conduct assays of products being exported, while its environmental, health and safety department has been operational since 2023.
PLZ said it had achieved 96% wastewater recycling and 90% metal recovery across its domestic operations.
The company is also constructing a lithium carbonate plant, with Huizenga saying production of what he described as rough lithium carbonate was expected to begin this month.
He said the plant would be the first of its kind in Africa, a claim that has not been independently verified by Mining Zimbabwe.
The policy question
The proposed royalty structure puts the fiscal debate around Zimbabwe’s lithium sector into sharper focus.
Rather than simply increasing or reducing royalties across the board, PLZ is proposing that the tax burden should depend on how far a company processes its mineral before sale.
Under the model, the highest royalty would apply to concentrates, while companies undertaking deeper processing would receive progressively lower rates.
For Government, the attraction would be the potential expansion of domestic processing, industrial capacity, employment and mineral-linked manufacturing.
For mining companies, the lower royalty at higher stages of beneficiation would provide additional cash that could be reinvested into processing plants and other infrastructure.
The challenge for policymakers will be determining whether the proposed reductions in royalty revenue at higher processing stages would be sufficiently offset by the wider economic benefits of beneficiation, including jobs, tax revenues, local procurement and increased value retained in Zimbabwe.
The Committee’s fact-finding mission comes as Government continues to push for greater value addition in the country’s energy-minerals sector.
PLZ’s proposals therefore place three connected issues before policymakers: how to design royalties that reward beneficiation, how to resolve the mismatch between local-currency revenues and foreign-currency tax obligations, and whether Zimbabwe’s treatment of export-related taxes is competitive enough to attract further investment into lithium processing.
