Konkola Copper Mines (KCM), a subsidiary of Vedanta Resources, has stopped operations at its Nchanga mine in Zambia due to import duties on copper concentrates.
Informing its employees, KCM stopped operations from 4 January due to a drop in the availability of acid. The imported concentrates are required for smelter and blending operations.
According to the company, market access to the concentrates has become limited with the introduction of an import duty on them, reported Reuters.
In September, Zambia, which is struggling with mounting debt, included in its annual budget a plan to increase mineral royalty rates by 1.5% from the beginning of 2019.
The budget also featured a fourth tier rate at 10% if the copper price touches more than $7,500 per tonne, and made minerals royalties non-deductible for tax purposes. It also plans to replace value-added tax with sales tax by April.
The company was quoted by Reuters as stating: “The introduction of 5% import duty on concentrates has made the smelting of imported concentrates commercially unviable.”
In December 2018, the country’s Chamber of Mines stated that mining firms may make over 21,000 workers redundant in response to higher taxation.
Last week, Zambian permanent secretary for mines Paul Chanda said that the company’s mining firms have been unable to justify how higher taxation would undermine their profits, despite the industry’s continued objections to the new tax framework.
Citing Chanda’s comments, Reuters reported that the mining ministry had asked companies to indicate how the new taxes would impact their production and profitability by end of last week, but none had so far indicated any.
Chanda told the news agency: “Two mining companies have written to us asking us to give them more time but we haven’t heard anything from the others.”
Zambia is a leading copper producer in Africa.