Glencore defers $800m investment in Zambia over tax row

2 October 2014 (Last Updated October 2nd, 2014 18:30)

Mining giant Glencore’s Zambian subsidiary Mopani Copper Mines has halted copper mining projects worth $800m due to the ongoing tax dispute with the country’s government, which is withholding around $200m in value-added-tax (VAT) repayments from the company.

Mining giant Glencore's Zambian subsidiary Mopani Copper Mines has halted copper mining projects worth $800m due to the ongoing tax dispute with the country's government, which is withholding around $200m in value-added-tax (VAT) repayments from the company.

If the projects are permanently suspended, more than 20,000 mine workers in Zambia may lose their jobs, claims the company.

According to Mopani Copper Mines CEO Danny Callow, the withholding of the money by the government has made it difficult for them to operate the mine and rethink of cancelling the on-going projects, reported Zambian Watchdog.

Among the many projects halted by the company include Mopani's Nkana mine near the Zambian city of Kitwe, where the company was planning to invest $323m, and expansion of the Mufulira and Mindola mines, where the company was planning to spend $800m on sinking two new deep shafts to extend the life of mines by 25 to 30 years.

Callow was quoted by Mining Weekly as saying: "We are determined and focused on ensuring that works on the aforementioned projects progress; [however,] I would like to express my concern and distress that the continued withholding of our VAT refunds to the tune of $200m, to date, may force us to slow down progress on these projects.

"Mining typically involves a huge capital investment requirement and in order to provide security and encourage a positive investment climate, we need stability and consistency in the fiscal regime."

"In fact, I must mention that some of the projects have since been suspended due to financial constraints and these suspended projects will have a major future impact on our goal to increase copper production yet again by more than 50%."

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

Despite many mining companies claiming that they cannot produce import certificates, Mopani managed to produce the documents.

Callow said: "The continued withholding of our VAT refunds, despite having provided all the necessary proof that our copper is exported using the Zambia Revenue Authority ASCYUDA system continues to have a critical and very negative impact on our operations.

"Mining typically involves a huge capital investment requirement and in order to provide security and encourage a positive investment climate, we need stability and consistency in the fiscal regime."

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