CAPE TOWN, Feb 9 (Reuters) - Vedanta Resources Plc would have to take tough decisions on its Zambian copper business after the southern African country imposed higher royalties that could deter investors, its chief executive said.
New legislation in Zambia, which came into effect in January, saw mining royalties for companies operating there being hiked to 20 percent from 6 percent on open pit mines and 8 percent from 6 percent on underground mines.
Plans by Zambia's newly-elected President Edgar Lungu to resolve the row sparked by the hike in mining royalties may come too late to revive investment in the sector, with confidence among foreign mining companies shaken.
Vedanta's CEO Tom Albanese said tough decisions would still have to be made by his company despite Zambia's encouraging remarks over the royalties.
"We are facing a very, very difficult situation in Zambia. From my perspective we will have to make some very difficult decisions even with the support of government," Albanese said on Monday at the Mining Indaba conference in South Africa.
"We are getting to the point where government is chasing capital away, chasing the investor away - it makes our job a bit harder."
The London-listed company said last month it would cut capital expenditure in its copper business in the southern African nation due to a sharp fall in prices and rising costs.
Barrick Gold Corp has threatened to pull out of Africa's second-largest producer of the metal completely due to the tax hikes.
That policy to set higher royalties was developed under populist former president Michael Sata, and was inherited by Lungu of Sata's Patriotic Front Party.
Lungu pledged to fight poverty and maintain the late Sata's legacy but has since signaled an intention to discuss the royalties with mining companies, after they threatened to cut production and jobs in a sector that is Zambia's life blood. (Editing by James Macharia)