Zambia goes after First Quantum over layoffs

Zambia goes after First Quantum over layoffs

First Quantum’s Kansanshi began production in 2005 and is the eighth largest copper mine in the world, as well as Zambia’s biggest. (Image courtesy of First Quantum.)

First Quantum Minerals’ (TSE:FM) Zambian unit Kansanshi announced Friday it has laid off 343 workers, mainly contractors hired to build a smelter that was completed in December 2014.

While the company argues it notified government officials of the upcoming job losses timely, Zambian authorities claim the firm did not inform of the measure according to procedures specified by local laws. Now, ZNBC reports, the government is asking Kansanshi to withdraw such decision and reinstate 93 employees.

The impasse adds tension to the already jumpy relationship between First Quantum — Zambia's largest foreign investor — and the government, as a result of an ongoing dispute over taxes.

Under a law passed in January, royalties for miners operating in Africa’s second-biggest copper producer more than tripled to 20% for some, affecting most copper producers operating in the country. That is expected to cause 12,000 job losses and shutdowns, according to Zambia’s chamber of mines. The system will disrupt the government’s objective of increasing revenues from companies including Glencore (LON:GLEN) and Vedanta (LON:VED), the industry body said.

In response, Zambian President Edgar Lungu asked his finance and mining ministers last week to change the new tax system by April 8 and consider options to resolve the impasse. These include negotiating interim tax deals with the individual mines most affected, modifying existing laws, deferring the new regime, or temporarily reverting to the old mine tax as a new one is negotiated.