First Quantum defers $1bn investment in Zambia over tax row

24 June 2014 (Last Updated June 24th, 2014 18:30)

Zambia's biggest copper producer First Quantum Minerals is postponing projects worth more than $1bn due to the ongoing dispute with the country's government over payment of taxes.

Zambia's biggest copper producer First Quantum Minerals is postponing projects worth more than $1bn due to the ongoing dispute with the country's government over payment of taxes.

First Quantum operations director Matt Pascal said that the 10% export duty introduced on unprocessed minerals has resulted in the piling up of $350m worth stock at the company's Kansanshi mine.

"The government is withholding $600m VAT repayments on exports seeking the mining companies to produce certificates from the importing countries."

In addition, the Zambian Government is withholding more than $150m in value-added-tax (VAT) repayments from the company.

The government is holding back $600m VAT repayments on exports seeking the mining companies to produce certificates from the importing countries.

Zambia mines minister Christopher Yaluma said that the government will release the repayments once the certificates are produced.

Mining companies contend that it is difficult to comply with the requirement as their produce is often sold to trading companies and they do not know its end user, reported Bloomberg.

"There has been a lot of uncertainty in the fiscal regime. First Quantum has either slowed down or postponed over $1bn in capital expenditure because of this uncertainty," Pascal said.

The company's decision will affect the expansion of the Kansanshi project and the second phase of smelter development, reported Reuters. These projects would resume when the government resolves the tax issue.

First Quantum's decision to delay investment in the country comes within a week after finance minister Alexander Chikwanda recommended a review of mining taxes to avoid tax evasion by major companies.

Revenues from the mining industry formed 18.8% in 2013.

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