Some mining companies in Zambia have suspended works on their expansion projects, because of alleged reduction in profits due to the newly introduced taxes in this year’s budget.
First Quantum Mining Country Manager, Chisanga Puta, cited his companies Mopani Copper mine and Kashime mine in Mkushi as some of the mines that have suspended projects.
He said over 4,500 job opportunities would have been created if these various projects were to be undertaken.
“About 600 jobs could have been created at Bwana Mkubwa mine, 2000 at Mopani on the construction of the shaft and 2000 more at Kashime whose investment ranges between US$150 million and $US200million,’ he said.
He said it has been difficult for his company to raise money for the construction of the roaster due to uncertainties in the mining sector following the introduction of the new taxes.
He stressed the taxes in the sector, including the new ones, which stand at 61 per cent, have left little money for reinvestment by companies.
Government this year introduced new tax regime in the mining sector that include a windfall tax of 25 per cent at the price of $US 2.50 per pound but below US$ 3.00 per pound.
It further increased the mineral loyalty tax from 0.6 per cent on the base metals to 6 per cent effective April 1, 2008.
However, due to the conducive environment for investment in the sector which has been caused by the raising of copper prices on the international market, Zambia has so far recorded about $US3billion investment.
He reiterated that the move by government to abolish the Development Agreement (DA) that was legally binding was a breach of the law.
Mr. Puta said the newly introduced taxes have dented the credibility of the country to the outside world.
He was speaking during a panel discussion on mining, which was held on alongside with the Euromoney Conference that closed in Lusaka today.
He said the mining companies were, from the onset, ready to negotiate with government on the new taxes.
Mr. Puta, however, stated that mining companies were still optimistic that an acceptable mining regime would be agreed upon with government in future.
Chamber of Mines Head, Fredrick Bantubonse, ruled out the possibility of mining companies to pull out following the new taxes.
He however said the reinvestments in the sector by companies would be difficult if no sufficient funds were left after paying the taxes.
Mr. Bantubonse said investors should be seen as partners in the development of the country.
But Managing Partner for Corpus Legal Practitioners, Elias Chipimo, stated that negotiations would have been ongoing if government did not take up the initiative to amend the mines and miners act.
At the same panel, Zambezi Resources Executive Chairman, Willie Sweta, said government and stakeholders should come up with a tax regime that would take into consideration both the needs of the investors and government.
Zambia Consolidated Copper Mines Investment Holdings (ZCCM IH) Chief Executive Officer, Joseph Chikolwa, advised mining companies that had problems with the new taxes to seek audience with government.
He said government was prompted to introduce new measures because of the failure by mining companies to declare dividends.
ZANIS/MK/KSH/ENDS.