(Repeats Feb. 6 story)
* Mining companies unnerved by government's policy change
* Glencore, Vedanta, Barrick mines among the costliest
* DRC a potential winner of uncertainty in Zambia
By Silvia Antonioli
LONDON, Feb 6 (Reuters) - Plans by Zambia's new president to reverse a hike in mining royalties may come too late to revive investment in the sector, with confidence among foreign mining companies shaken and neighbouring Democratic Republic of Congo looking a potential better bet.
Eager to fill a hole in its finances, the government said last year it would scrap a corporate income tax of 30 percent while hiking mining royalties for companies operating in Africa's second-largest producer of the metal.
That policy, developed under populist former President Michael Sata, was inherited by newly-elected President Edgar 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 scale back the royalties, which came into effect in January, after mining companies threatened to cut production and jobs in a sector that is the life blood of the country.
The government is also ready to negotiate another sticking point: the payment of $600 million in Value Added Tax (VAT) refunds, which the industry says it is withholding.
But with no clear plan in place yet to reverse at least some of the royalty hikes of 20 percent from 6 percent on open pit mines and of 8 percent from 6 percent on underground mines mining companies are unimpressed.
"In hindsight Zambia might regret implementing this tax change at the low point of the mining cycle," said Åsa Borssén, resources policy analyst SNL Metals and Mining.
"There are benefits to implementing a royalty system in this kind of governance environment in developing countries but it has to be reasonable in comparison to other tax environments, otherwise they will lose out on revenue as companies will move their investments elsewhere."
Already contending with a plunge in copper prices to 5-1/2 year lows that have slashed their profits, mining companies are unnerved by the swift policy change and are unlikely to invest more in projects in the country whatever the outcome.
"Mining companies are not going to put another dollar in there, whatever their final decision is, because the government has proved unreliable," said a mining industry source.
This will hurt Zambia, where mining accounts for 12 percent of its gross domestic product and 10 percent of its formal employment.
SURVIVAL RISK
Taxing revenue rather than profit can work better in emerging countries with limited resources to check on collection and high tax evasion.