KCM Nchanga Open Pit
KCM Nchanga Open Pit

Vedanta, the majority shareholder in Konkola Copper Mines (KCM), has stopped operations at its second copper mine over import duties on vital supplies needed for processing.

In a note to employees seen by Reuters, Konkala Copper Mines (KCM) said that it would be suspending operations at the Nchanga mine beginning last Friday (January 4) because acid concentrate was not readily available for its smelter.

In its national budget in September, Zambia announced it would increase the mineral royalty rates by 1.5%, introduce a fourth tier rate at 10% when the copper price exceeds $7,500 per tonne, and make royalties on minerals non-deductible for tax purposes.

In addition, it imposed new duties on imports which has already started to bit.

Citing a note from KCM to employees, Reuters said that operations at the mine would be suspended from January 4.

New import duties meant there was a shortage of acid resulting in the suspension of its Nchanga smelter.

“The introduction of 5% import duty on concentrates has made the smelting of imported concentrates commercially unviable,” said Vedanta.

KCM said it has to import concentrates for its copper smelter to operate at full capacity. While Nchanga has not been shuttered completely, operations have been pared back due to slower smelter production.

The import duty on concentrates is just one of a suite of measures introduced by the Zambian government to tackle government debt.

KCM operates another two mines in the country: the Konkola copper mine (which is its flagship) and the Nampundwe pyrite mine.

Zambia’s Chamber of Mines said on December 20 that the effective tax rate Zambian miners would be paying would range between 86% and 105% putting 27,900 jobs at risk. More than half of the country’s copper mines would be unprofitable this year, it said.

Zambia’s government is showing no signs of changing its stance, however, Paul Chanda, Permanent Secretary for Mines told Reuters that miners in the country had failed to demonstrate how the fiscal changes, which also include planned alterations to VAT from April, will hurt their profitability.

Chanda said his ministry had asked mining companies to provide financial models on how the new taxes would impact them, but none had done so. “We wanted them to show how the new taxes will affect production and profitability but so far we haven’t received anything,” Chanda told Reuters.

First Quantum Minerals, a Toronto-listed mining companies which produces copper in Zambia, said on December 21 that it would retrench 2,500 staff at its Zambian facilities in the first quarter of 2019 as a result of the higher taxes.

“Two mining companies have written to us asking us to give them more time but we haven’t heard anything from the others,” Chanda told Reuters.

Copper output will be flat this year and will start declininhg from 2020 as a result of tax increases, Sokwani Chilembo, CEO at the Chamber of Mines told Bloomberg News last year.

The industry group has forecast production of 820,000 metric tonnes for this year. Copper accounts for more than 70% of Zambia’s foreign-exchange earnings.

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30 COMMENTS

  1. Edgar and his uneducated cabinet ( more than half of them without tertiary education) lack the skill to meaningfully engage with the Mines. Make no mistake, the mines employee the best Accountants and lawyers so you need smart people to talk to them.

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    • Don’t underestimate the intellectuals around the President. Amos Chanda, Kaizer Zulu, Antonio Mwanza, Chilufya Tayali to name a few

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    • This issue of the mines affects all if us directly or indirectly. So we all need to support government in any way we can on this point. it is commendable that they are trying to make the mines contribute more to our country. This in itself is commendable, even if its being handled clumsily. We may dislike PF, but on this one we must stand with them. Zambia needs to benefit more from its natural resources.

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  2. Flexing muscles huh. GRZ should seize their mine, after all they owe ZRA a lot in taxes.

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  3. Let them pay the new taxes or let them pack and go, other serious investors will certainly show up. We need to be derious and grounded in these matters. UPND and HH will suffer massively in 2021 for siding with imperialist who are here to just externalise huge profits and leave deserts in our country

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  4. “Chanda said his ministry had asked mining companies to provide financial models on how the new taxes would impact them”
    Its actually the governments job to do that and convince the mining companies the benefits of the new tax regime.
    Running an economy is not as simple as declaring national day of prayers for party cadres.

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  5. am wondering why we always have to dance to the mining companies tunes. Let the mines give caesar what belongs to caesar.

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  6. At once you can either see the strength or weakness of our government. I see a weakness in our PS of the mines. How can the mines give financial models on the silver plate to our government. That will never happen in any part of the world. Once the business or financial model is given out that is the end of the company. It is government responsibility to figure out how much the mines makes after all the deductions have been made. If this is a team which is representing our nation we have failed.

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  7. This posting is all over the place in logic. What (Vedanta), are saying is that they are experiencing 1 of ‘Porter’s 5 Forces.’ That is problems with supplies to make its product. Quote, ‘because acid concentrate was not readily available for its smelter.’ The other reasonings provided by Bloomberg and the so called, prediction by the unpatriotic western minion, Sokwani Chilembo, CEO at the Chamber of Mines who said to Bloomberg his paymasters that, ‘Copper output will be flat this year and will start declininhg from 2020 as a result of tax increases.’ I hope someone in state House is eyeing this Chilembo for redundancy (since redundancies are flying in the industry at the moment).

    The proper view is simply that prices for the concentrate acid on the international market…

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    • The proper view is simply that prices for the concentrate acid on the international market will influence the final profits Vedanta can make on its outputs which in turn will affect how much taxes we will be able to wrestle out of the ‘ investors’ …read …’miscreants’ in the mining sector.

      Is Vedanta’s other mine called Pyrite mine or is it Pirates’ mine because frankly, Vedanta should have been delisted by now from the stock markets. What a bunch of corporate bandits operate in Zambian mining! The current Tax rate and 5% import duty is too low but adequate. NATIONALISE TO CONTROL EARNINGS AND EMPLOYMENT IN THE INDUSTRY.

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    • This is time for us to get our KCM back! IDC and ZCCM please wake up, we can re-capitalize this Mine and make it viable and productive. Wake Up Zambia this our Time again. we made a big mistake giving this MIne to Vedanta on a song!

      GET KCM BACK!

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  8. 1. No smelter in the world requires acid concentrate to operate.
    2. Rather, it is a shortage of copper concentrates to fill the capacity of the four smeletrs in the country, hence the miners purchase ore/concentrates to fill up the deficit which is the issue here. GRZ has imposed 5% import duty for every tonne of contained copper in these ore/concentrates.
    3. During smelting, sulphuric acid is produced as a by-product. At Nchanga, this acid is then used to recover/produce copper from the tailings. Now, because it is less feasible to import ore/concentrates, acid production will be low and consequently copper production will also be adversely affected.
    4. “New import duties or the tax regime comes into effect in April. How they already biting???
    5.It only a part of the mine that has…

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  9. 5.It is only a part of the mine that has been placed on care and maintenance. This part of the mine is composed of particularly high acid consuming material.
    6. Ministry Permanent Secretary Chanda should have a parallel calculation on how the new tax regime will impact the mines to counter the miners position rather than requesting for the template from the miners. This should further clarify where the 86 to 105% Tax range as calculated by miners is coming from!
    Whereas I am not siding with the miners, I feel GRZ should not impose the 5% import duty as this can be recovered via the sales tax on the finished copper produced. There should be an incentive to operate these smelters at full capacity.
    Further, there are foreign companies who are only looking to utilize the smelters to…

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  10. Further, there are foreign companies who are only looking to utilize the smelters to outturn finished copper from the supplied ore/concentrates and the smelter owners only get treatment charges. How is this situation going to be handled?

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  11. In conclusion, like many other things, the leadership has clumsily handled this and shows a lot of incompetence! But then that is what you get when all there is, is ONE IDEA! to maximise revenue

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  12. Do you know why the Chinese do not trust Indians? These are the *****s from Bombay or Mumbai we went and sold our valuable resources too. Even the British have been after the Vendata ceo criminal. It is time Zambia and Africans fought back, and branded together for the greater good. We can always source better investors.

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  13. India has never been Africa’s friend. Though further in distance from Africa, the Chinese have done far more with Africa in development than leeching India. Even the Chinese have to be watched, but you should always be cautious about Indians. Look at their racist Ghandi, fought against Africans own African soil.

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  14. The problem with the PF is that they act and analyse issues afterwards and then start patching up!! For example if a mining company chooses to close a shaft or entire mine,WHAT IS GOVERNMENT’s PLAN B?? Most of these mines have gotten used to paying low taxes, literary stealing from Zambians and they have gotten used to threatening government like they are doing now,one WONDERS WHY OVER ALL THESE YEARS WE HAVE NOT DEVISED A STRATEGY TO CONCLUSIVELY DEAL WITH THESE CROOKS,LIKE REPOSSESSING CLOSED SHAFTS AND FORCING TAKEOVERS!!.

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  15. What we seem to forget is that apart from Copper our dear Zambia has nothing else. Lets tread carefully otherwise we will soon know how poor we are. We have overrated ourselves too much yet all we have and produce is just one product in the form of copper. We get 80% of our forex from copper which we then use to import all the stuff you see in shoprite and in the malls. This fight with the copper miners isn’t going to benefit us as a nation. The politicians want to increase taxes so they have a larger purse from which to loot from. We would rather have lower taxes in the mines and keep our jobs and keep this economy working. The structure of this economy is that of a country that is ALWAYS on the door step of acute poverty and this thanks to the clueless leadership we have.

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    • Also, we must be alive to the stark reality that there are no investors queing up to take over our old mines with diminishing resources!

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    • Don’t be a closed mind!
      Zambia has many other mineral resources e.g. emeralds, gold, uranium, diamonds, etc.
      Above that we have the biggest assets human and land.
      What does Singapore, Malaysia & Hong Kong have to as developed as they are?

      We just need enabling environment & diversify in education & invest massively in agriculture & tourism.
      Education gives opportunities to be INVENTIVE, INNOVATIVE & CREATIVE: SIMPLY INGENUITY!
      That’s how Singapore, Malaysia & Hong Kong survive economically as rich nations!
      Land & Human assets are the greatest assets any nation should crave to have!

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    • I mean even if you have all the mineral resources but do not have tech-know-how to mine them they’ll useless resources. That’s what is obtaining in Zambia: sitting on minerals but not realizing that underneath there are minerals. That’s why Senegalizing, Europeans, Indians and Americans will continue to dominate us because they have tech-know-how to mine them.

      Right education can spur Zambians in being INVENTIVE, INNOVATIVE & CREATIVE: SIMPLY INGENIOUS!

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  16. Koma,,, kwena,,, pyrite ore from Nampundwe was used to make sulphuric acid. Even Nkana mine had an acid plant. Just what is going on at ?
    Sometimes the reasons advanced are so frivolous you wonder how they get away with it. Isn’t there anyone at the chamber of mines with the experience to correct this?

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  17. This is time for us to get our KCM back! IDC and ZCCM please wake up, we can re-capitalize this Mine and make it viable and productive. Wake Up Zambia this our Time again. we made a big mistake giving this MIne to Vedanta on a song!

    GET KCM BACK!

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  18. Codelco mine in chile is state owned and Chile has produced the fines of mining Engineers and ancillary professionals. That is the way to go

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Comments are closed.