PRESIDENT Lungu’s directive to revise the mining tax regime and address the value added tax (VAT) refund issue is from an international perspective a positive turn that Zambia is open for international capital, Vedanta Resources chief executive officer Tom Albanese has said.
Mr Albanese, who is also Konkola Copper Mines (KCM) chairperson, commended President Lungu’s directive as a bold decision which recognises the importance of foreign direct investment (FDI) to protect the future of the Copperbelt and the entire mining industry.
KCM is a Vedanta Resources subsidiary.
In an exclusive interview in Lusaka yesterday, Mr Albanese commended Government’s response to the VAT refund issue.
“We have unfortunately been running business in a cash deficit because of non-refund of VAT.
“The effect has been to cramp business flexibility in terms of making regular cash payments to vendors and counterparts,” Mr Albanese said.
“It has been hand-to-mouth every month. We are happy with Government’s response and recognition of the effects of the non-refund of VAT,” he said.
Mr Albanese said one of the constraints caused by non-refund of VAT has been inability to run the company’s smelter at full capacity.
“Smelting should be a business that is profitable for KCM and also good for the country by converting the concentrates into sellable copper.
“Unfortunately, until President Lungu’s decision, cast smelting was a loss making venture,” he said.
“With the new ordinance, we are planning to ramp up our capacity for smelting and handling third- party concentrates.”
Mr Albanese said the slow-down in Chinese metal demand has affected fortunes of the global mining industry resulting in withdrawal of global capital from mining to other sectors like insurance.
He said this has placed a greater burden on mining companies in emerging economies.
Mr Albanese said for a long-term perspective, it will be important for mining companies and Government to recognise the importance of attracting FDI.
Mr Albanese also said KCM was currently operating at a loss due to a number of factors, including falling ore grades at Nchanga Open Pit, high cost of production and lower global copper prices. However, management was seeking ways to return the business to profitability.
KCM is also taking steps to ramp up production at its flagship Konkola Deep Mining Project, which is the future of the mine.
He, however, expressed optimism of a rise in copper prices within the next five years.
“The world will need copper again and I am optimistic of copper prices rising in the next five years.
“But it takes capital to stand again,” Mr Albanese said.