Zambia’s government is under mounting pressure to reverse a royalty hike that could trigger thousands of layoffs at a copper mine owned by Barrick Gold Corp., but a rollback is unlikely until after an election this month, analysts say.

Trade unions, business groups and opposition politicians are pressing for a reversal of the sharp increase in the royalty rate on open-pit mining in Zambia. At least 12,000 jobs are in jeopardy across the mining sector in Africa’s second-biggest copper-producing nation, according to the Chamber of Miles of Zambia.

“It has created a lot of anxiety among Zambian workers,” said Nevers Mumba, one of the three leading presidential candidates in the Jan. 20 election.

“Other investors could pull out of Zambia,” he said in an interview.

“There’s a risk of a run in that sector. I’m concerned about the ripple effect – it could have a terrible impact.”

Under the new tax regime, which took effect on Jan. 1, the royalty on open-pit mining has tripled to 20 per cent, compared to the previous rate of 6 per cent.

Barrick and First Quantum Minerals Ltd. are among the Canadian mining companies that will be heavily affected by Zambia’s higher royalty rates. Barrick and First Quantum are two of the biggest foreign investors and private employers in Zambia.

Because of the royalty increase, Barrick has announced that it will suspend operations at its Lumwana copper mine, which employs 4,000 workers. The company says it will begin laying off workers in early March and will idle the mine by June.

Barrick acquired the mine through its troubled $7.3-billion purchase of Equinox Minerals in 2011. The acquisition has driven down Barrick’s stock and led to a series of writedowns, wiping out most of the mine’s value.

Mr. Mumba, leader of one of Zambia’s biggest opposition parties, has promised to slash the royalty rate if he wins the presidential election. Analysts say he is unlikely to emerge as the winner, but regardless of who wins the election, the royalty increase could be rolled back as early as February.

The royalty hike has also been criticized by a wide range of groups, including the World Bank, the International Monetary Fund and Zambia’s National Union of Mines and Allied Workers.

“Revisions to the rules are likely,” said a recent analysis by Eurasia Group. It said the royalty rate for open-pit mining could eventually be reduced to a compromise level of 10 to 12 per cent. Another option, it said, is a return to previous tax rates, but with tighter control of perceived tax loopholes.

“Such changes are unlikely to be formulated until the new administration is settled – late February at the earliest,” the Eurasia Group report said.

It predicts that the ruling party’s candidate, justice and defence minister Edgar Lungu, is likely to win the election, but without a big margin of victory. This means he will enter office “without a true mandate and without a strong majority in parliament,” it says.

Zambian government leaders have vowed that they won’t be “intimidated” by the threatened suspension of Barrick’s mine. But they also say they are holding discussions with the mining companies to try to resolve the impasse.

Barrick says it is “open to discussions” with the government to find a way of keeping Lumwana operating.

“We are hopeful that a solution may be found,” said Barrick spokesman Andy Lloyd.

“A number of groups have expressed concerns about the impact of a suspension on jobs and the economy,” he said. “We’ve made a lot of progress at Lumwana in the last two years, to reduce costs and make the mine more efficient …. Unfortunately, the economic reality is that a low-grade mine such as Lumwana cannot support a 20 per cent gross royalty in today’s copper price environment.”

First Quantum’s chairman and chief executive, Philip Pascall, has voiced similar concerns, saying he is worried that the tax rules are being changed “at a time when stability in mining fiscal policy is crucial.”

First Quantum had already announced last June that it would delay more than $1-billion (U.S.) in investment projects in Zambia because of tax uncertainties, including Zambia’s withholding of $600-million in value-added tax repayments to mining companies.