Zambia Leader Eyes Swift Deal in $7.9 Billion Mine-Tax SpatBy
First Quantum Minerals bill includes $5.7 billion in interest
Tax authority is autonomous, intervention would be last resort
Zambian President Edgar Lungu wants his tax authority and First Quantum Minerals Ltd. to speedily resolve a disputed tax bill the copper producer received this week, which at $7.9 billion is bigger than the country’s 2018 budget.
“It’s a policy of government not to interfere with independent assessments made by the tax authority,” Amos Chanda, Lungu’s spokesman, said by phone late Wednesday. “All we do is to encourage quick negotiation of the parties to get to an agreement quickly so that there are no anxieties on both sides.”
Shares in First Quantum, which derives 84 percent of its revenue from Zambia and accounts for more than half of the country’s copper production, fell 12 percent in Toronto on Tuesday after it announced the tax authority had demanded the payment. The company “completely refutes” the assessment, which includes $5.7 billion of interest, Chief Executive Officer Philip Pascall said on a call with investors Wednesday.
It’s important that the development has been made public, government spokeswoman Dora Siliya told reporters Thursday.
“It means that the Zambia Revenue Authority is not sleeping,” she said. “Yes, we wish that it hadn’t taken this long, over time because this company is being accused that it has been hiding tax declarations for over five years.”
The stock regained some ground on Wednesday, closing 3.7 percent higher at C$18.65.
First Quantum isn’t the first miner to be hit with a massive tax bill for operations in Africa. Last summer, Tanzania sent Acacia Mining Plc a demand for payment equal to almost two centuries’ worth of the gold miner’s revenue. And the Democratic Republic of Congo is moving ahead with a new mining code that may dramatically raise tax payments. The Zambian government in 2015 reversed a move to increase mine royalties to as much as 20 percent after Barrick Gold Corp. said it would close its mine there.
The Zambia Revenue Authority is autonomous and the government would only intervene in the dispute as “a matter of the last resort and if circumstances demand that an intervention is made,” Chanda said. “We are very confident in the professionalism in Zambia Revenue Authority that it will deal with investors within the agreed parameters of tax administration.”
— With assistance by Matthew Hill