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Mining Investment Opportunities

Serbia offers promising investment opportunities, particularly in primary commodities, especially in mining and minerals. Abundant natural resources, including large forest reserves, should also be attractive to investors. A highly skilled workforce in these industries and low labor costs add to the attractiveness of the economic climate.

To date, growth has relied too heavily on domestic demand and non-tradable segments of the economy, so efforts to help expand her export sector can be undertaken under highly favorable terms. Serbia’s infrastructural needs are almost limitless, whether in energy, transportation, manufacturing, or information technology.

Serbia’s production of minerals is far more significant regionally than it is globally. Copper, iron, steel, and refined petroleum products form the bulk of production in this sector. Lignite constitutes over 98 percent of coal reserves. The state owned ELEKTROPRIVREDA SRBIJE (EPS) manages the generation and distribution of electricity, lignite production and processing, and hydropower generation. EPS is involved in most elements of mining and other energy production. Lignite is mined in opencast pits located in the Kolubara and Kostolac basins in the central and eastern regions of the country respectively. Due to high moisture and ash content, and low net calorific value, almost all lignite is routed to thermal power plants.31 Local resources notwithstanding, Serbia has been running substantial deficits in the energy sector due to the cost of importing crude petroleum and gas products and services. Crude petroleum and natural gas is imported from Russia. According to Serbian government projections, the country’s supply of coal will last 55 years, and oil and gas just 20 years. Critically, over the past decade the capacity of power plants has decreased steadily, 77 percent by one count, due to lack of repairs and deferred maintenance of an aging infrastructure.

Mineral production is mostly in private hands, however the Serbian government is the sole owner of the country’s only copper producer, Rudarsko Topionicki Bazen Bor (RTB Bor). It also controls all lignite production and holds a 49 percent share of Naftna Industrija a.d., producers of natural gas and crude, and refined petroleum. Serbia has been unsuccessful in attracting foreign buyers for RTB Bor. Empire Mining Corporation and Euromax Resources Ltd., of Canada own copper exploration licenses in Serbia, but little activity has been reported. In 2010, Dundee Precious Metals, Inc. of Toronto declared its intention to sell its copper exploration licenses in Serbia to Rodeo Capital of Vancouver and Queensland Minerals Ltd. of Australia (in July 2010 Rodeo was acquired by Dundee Plemeniti Metali D.o.o. in a reverse merger transaction).Iron and steel production by US Steel Serbia d.o.o., the country’s only producer of pig iron and crude steel fluctuates significantly based on market demand, which of late has been low.

Precious metals, particularly gold and silver, are present in deposits in eastern Serbia. According to Serbian government sources, “gold grades as high as 5 g/t can occur in the high-sulphidation type ores at Bor [in the east, site of one of the largest copper mines in Europe] … Average gold grades in the porphyry copper at Majdanpek and Borska Reka are 0.6 and 0.3 g/t respectively.”35 Kopaonik district, Belo Brdo, Ajvalija, and especially the Radan Mountain district are described as “most promising for precious metals.” In 2011, British firm Orogen Gold reported progress on its plans to reopen access to two shallow gold mines in Deli Jovan in east Serbia. US-based Freeport-McMoRan Copper and Gold Ltd. intends to search for copper, gold and silver at depths of over 2 kilometers with RTB Bor, again in eastern Serbia.

Serbia is a European Union Applicant and foreign investors may acquire concession rights on natural resources. International exploration companies currently active in Serbia include: Rio Tinto (UK), Dundee Precious Metals Inc. (Canada), Freeport-McMoran Exploration Corp. (Canada), Euromax Resources Ltd. (Canada), Reservoir Capital Corp. (Canada), Empire Mining Corp. (Canada), Erin Ventures Inc. (Canada).

Serbia has competitive tax rates for individual and corporate income. The top individual income tax rate is 15 percent. Salaries are taxed at 12 percent, and other personal income (royalties, investment, and rent) can be taxed at up to 20 percent. The corporate tax rate is a flat 10 percent. There is a 3 percent State royalty on all mining operations and no free carried equity interest for the State in mining projects.

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