Zambia’s biggest copper producer, said it has slowed down or postponed more than $1 billion of capital expenditure in the country because of a tax dispute with the government.
“There’s a pervading atmosphere which creates a bit of uncertainty,” Operations Director Matt Pascall said yesterday in an interview in Lusaka, Zambia’s capital. “Certainty is absolutely the critical thing that’s required if we’re going to look at any form of investment.”
The Vancouver-based company is already investing about $2 billion in new mines and smelters in Zambia and says it’s the country’s biggest taxpayer.
Zambia is withholding more than $150 million in value-added tax repayments from First Quantum, Pascall said yesterday in a speech at an industry conference. A 10 percent duty on exports of semi-processed copper ore, known as concentrates, has created a build-up of stockpiles at the company’s Kansanshi mine which are now valued at $350 million, he also said.
Zambia, Africa’s second-biggest copper producer, is trying to curb tax avoidance by requiring mining companies to present certificates from the countries that import its metal.
Mines Minister Christopher Yaluma told reporters at the conference yesterday that the Zambian government will release about $600 million in withheld VAT repayments once the requirement is met. Mining companies have said it’s difficult to comply because their copper is often sold to trading companies and they don’t know where it ends up. Pascall said yesterday the requirement is “impossible.”
While First Quantum gets most of its revenue from its African operations, it has been expanding into other regions. On June 17 it agreed to buy Lumina Copper Corp. for about C$407 million ($379 million) to add a mine project in Argentina. It bought Inmet Mining Corp. last year to gain control of a Panamanian copper project.
Copper for delivery in three months fell for the first time since June 12, slipping 0.1 percent to $6,878.25 a ton at 7:54 a.m. in London.