First Quantum warns Zambia tax hike will cost jobs, investment drop
Canada’s First Quantum Mineral (TSX:FM), Zambia’s largest foreign investor, said Tuesday that the country’s decision to raise mining royalties from 2015 would discourage future endeavours and cost jobs.
The African nation, the continent’s second-largest copper producer, will increase the royalties for open pit copper mines from 6% to 20% and to 8% for underground mines beginning January 2015, Finance Minister Alexander Chikwanda said in the 2015 Budget speech.
First Quantum Minerals’ Zambia government affairs manager, John Gladston, told Reuters that the new tax system would “inevitably” lead to fewer new jobs and dissuade entrepreneurs from investing in the country.
The Canadian miner had already delayed investment projects worth $1.5 billion in Zambia due to uncertainty over the fiscal regime.
The increased royalties come at a time when the Zambian Government and copper mining firms are in disputes over tax refunds.
The government is holding back $600m of VAT repayments on exports, seeking the copper mining companies to produce certificates from the importing countries. This action has forced major copper mining firms such as Glencore and First Quantum to halt or postpone multi-million dollar projects in the country.
First Quantum is not the only company stepping up pressure on the Zambian government. Earlier this month Glencore (LON:GLEN) idled operations at its zinc mine and cancelled over $800 millions worth of copper projects in the country.
Image courtesy of First Quantum.