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CAPE TOWN — With no sign of compromise from Zambia on a controversial royalty tax regime, First Quantum Minerals Ltd. says it will prolong its suspension of more than $1-billion in mining investment plans in the African country.
The Vancouver-based company, whose investments in Zambia include a majority stake in Africa’s biggest copper mine, is among the Canadian miners that were heavily affected by Zambia’s decision to triple its open-pit mining royalty rate to 20 per cent from 6 per cent last month.
Some analysts had predicted that Zambia might roll back some of the royalty hike after its presidential election last month, but government leaders are giving no hint of a reversal so far.
“They’re sticking to their guns,” Matt Pascall, operations director for First Quantum, said in an interview on Monday. “All the latest statements by the minister of finance, and even the president, indicate no change.”
First Quantum had planned an expansion of its biggest Zambian asset, the Kansanshi copper mine, and a smelter, but those investments are now “still on hold,” Mr. Pascall said.
He said the Kansanshi mine has paid nearly $3-billion (U.S.) in taxes to the Zambian government over the past six years. “This is up to 20 per cent of Zambia’s tax take, coming out of one mine,” he said.
“We’d like to see a more predictable tax environment. Since 2008, there have been a number of major changes. It’s very difficult to plan mid-term or long-term projects.”
There was recent talk of a special deal to reduce the royalties for one foreign-owned mine in Zambia, but the company rejected the offer and insisted on an industry-wide deal, Mr. Pascall said.
One Canadian company, Barrick Gold Corp., responded to the higher royalty regime by announcing plans to begin laying off some of its 4,000 employees in Zambia next month, and to suspend operations at its Lumwana copper mine by June.
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