TORONTO/LONDON (Reuters) – Canadian miner First Quantum Minerals Ltd is weighing an investment of around $1 billion to lift output at Africa’s biggest copper mine in Zambia, a company document seen by Reuters showed, despite a feud with state miner ZCCM-IH over project funding.
The investment would add a decade of life and head off production declines at the Kansanshi copper mine, increasing annual production to 300,000 tonnes over time from an expected 235,000 tonnes last year, according to a company presentation given to Zambian government officials.
But securing board approval, which would be needed over the coming year, is likely to be complicated by disputes between miners and the Zambian government over taxes and assets, according to analysts and miners with knowledge of the country.
Western miners are on edge as Zambia and neighboring countries seek to increase their share of revenue from natural resources.
Zambia hiked copper royalty taxes by 1.5 percentage points last year and introduced a new 10% rate when global prices exceed $7,500 per tonne, consultancy Verisk Maplecroft said.
Mines Permanent Secretary Barnaby Mulenga last month said copper miners would also have to account for the gold they produce to boost state revenue.
“We do not anticipate any fresh investments to extend the life of copper mines while this, and increased taxation, hangs over miners,” Verisk Maplecroft senior analyst Indigo Ellis told Reuters on Friday.
A source close to First Quantum said the plans will be presented to the company’s board this year but the project is unlikely to win approval without significant changes to Zambia’s tax regime.
Shares of First Quantum extended losses after the Reuters story and were down 6.3% at C$12.44 on Friday afternoon in Toronto.
First Quantum contemplated expanding Kansanshi in 2011 at a cost of $1.5 billion, but that project was shelved.
Without investment, output would drop sharply from 2022 to about 130,000 tonnes by the middle of this decade, the presentation shows.
Canadian-listed First Quantum is studying expansion amid a dispute with Zambian state miner ZCCM-IH over profits from the mine that have been set aside for the project.
ZCCM-IH owns 20% of Kansanshi Mining PLC, with First Quantum holding the balance.
First Quantum last month began arbitration proceedings against ZCCM-IH following a criminal complaint made by the state miner to Zambian police over a transfer by Kansanshi Mining to a First Quantum subsidiary.
At issue is a transfer of $520 million, a separate document seen by Reuters showed.
Two sources said the money had been set aside in a high-interest account to help fund expansion at Kansanshi.
First Quantum was not available for immediate comment on Friday.
ZCCM-IH did not immediately respond to a Reuters query.
Sources declined to be identified as the information was not public.
“First Quantum last month began arbitration proceedings against ZCCM-IH following a criminal complaint made by the state miner to Zambian police over a transfer by Kansanshi Mining to a First Quantum subsidiary.
At issue is a transfer of $520 million, a separate document seen by Reuters showed.
Two sources said the money had been set aside in a high-interest account to help fund expansion at Kansanshi.”
Probably putting the money meant for future investment out of reach of the long tentacles of corrupt politicians. Obviously ZCCH -IH is under pressure from IDC to declare some of that cash as dividends which our corrupt politicians can then access.
Tuli muchibe bane, with 2021 fast approaching and politicians desperate not to lose elections. You can understand their desperation,…
Boom! America kills Aranian Qasem Solemani and his death pushes world crude prices up by 4% amid uncertainty in the sector. What does that mean for Zambia?
A persona non grata Foote here tied the so called Aid to your need to embrace LGBTQ.
I can’t imagine a Country in the world ripped out of it’s assets in the name of privatization. UAE can’t privatize its oil fields, never. Arm twisted or not.
Zambia, a country pushed to dance to the dynamics of the happenings globally. Turmoil in the middle east directly harm us. Confusion in the copper prices directly hurt us. Zambia went into the globalization narrative head first. Bought and buys into the foreign investment stories head first. If privatization was meant to ease Zambia’s economic owes, guess what? It hasn’t.
More money invested and yet everyday the country gets poorer. All that will happen is more load shedding hours because the mines will be needing more power.
….Tuli muchibe bane, with 2021 fast approaching and politicians desperate not to lose elections. You can understand their desperation, its too ghastly to lose.
But going they are anyway.
But not to be replaced by Trible HH for sure!
Milk Zambia dry should be the modus operandi of all foreign investors! Zambophiles like myself have been writing to government officials with proposals to improve Zambia’s share of her mineralwealth…TO NO AVAIL
#3 Buldeo, you can increase Zambia’s share of its mineral wealth by finding the cash to be the lead investors, not just corruotly reaping where you did not sow.
There is no short cut to wealth but your own sweat and investment.
.. unless maybe you are Trible HH.
But what is the chamber of mines saying,the prediction by chamber of mines that the production trend of copper production will continue to go down even in 2020 is not in good faith.If the owners are saying production will go up when such huge investment is made and with the new investor in KCM meaning the overall production will improve so chamber of mines don’t cheat the nation please.
@4 Junior jj,Our Mineral resource is our equity,it is in our soil They can’t mine in the air,they are here bcoz of what we have therefore that should give us enough shareholding and power to even participate in the selling of copper and other mineral by-products.It is at selling where we are being ripped off,we need to know who is buying and at what price!!
How old are you Junior? minerals and other natural wealth is our only inheritance that God has given us to eradicate poverty,now these multi-national companies are reaping our inheritance and some Zambians like Mateo G are clapping for them.
I would rather not give a detailed comment on this matter in order to avoid disclosing privileged information. However, all I will say is that any decision made by the government and the board will put zambian first. Long gone are the days when we would sacrifice our peoples livelihood just attract non tax abiding companies. We will tax according to what benefits us Zambians. If a company doesn’t like that, they can pack up and leave. Kz
“the project is unlikely to win approval without significant changes to Zambia’s tax regime.”
In other words, not content with owning the copper, they don’t want to pay taxes over it either.