| LUSAKA, February 12
LUSAKA, February 12 A row over new Zambia mining
taxes has deepened after foreign mine owners rejected the
proposed fiscal regime and threatened to seek international
arbitration to resolve the stand-off, officials said on Tuesday.
The foreign firms told a watchdog committee of the
parliament that they were rejecting the proposed windfall profit
tax at a minimum of 25 percent and an increase in mineral
royalty to 3.0 percent from 0.6 percent because the government
had not consulted them over the proposals.
Attorney general Mumba Malila however, told Reuters that
there was no need for litigation because the new tax regime was
"fair for the mining companies to continue making profits."
"We hope they will not drag the government into an expensive
litigation exercise. There is no need for litigation because the
new regime still allows them to make profits and they will soon
see that," Malila told Reuters.
In January, the government also introduced a variable profit
tax at 15 percent on taxable income above eight percent and
raised corporate tax to 30 percent from 25 percent in a move
that will effectively raise mining taxes to 47 percent from the
previous 31.7 percent, starting from April.
First Quantum (FM.TO) Minerals country manager for Zambia,
Chisanga Puta-Chekwe, said the Canadian-based firm would seek to
renegotiate its 15-year agreement on low taxes with Zambian
"We are really eager to renegotiate with the government, but
if this fails, it will be difficult to avoid invoking (a clause
on) international arbitration over the matter, although this is
not our preferred course of action," Chekwe-Puta told Reuters.
He said the government had assured First Quantum Minerals it
would not increase existing taxes or introduce new taxes during
the 15-year stability period.
"The reason First Quantum raised money to invest in Zambia
was because there was a guarantee that for 15 years, tax agreed
upon would not go up and that there would be no new tax
introduced," Puta-Chekwe said.
Chekwe-Puta said the proposed taxes would prevent First
Quantum Minerals from conducting expansions at its mining units.
Managers of the major copper and cobalt mines also told the
parliamentary committee that they wanted to renegotiate
contracts they signed with the government, which awarded them
exemptions on taxes for periods between five and 20 years.
Senior managers of Mopani Copper Mines, a joint venture of
Swiss firm Glencore International AG and First Quantum Minerals,
Chibuluma Mine Plc, a unit of South Africa's Metorex MTXJ.J,
Chinese-owned Chambishi Copper Mine complained over the new
Others were from Luanshya Copper Mines and Lumwana Mining
Plc, owned by Australia's Equinox Minerals Ltd. EQN.AX.
"The stand-point is the approach the government has taken
(because) they told us we have to renegotiate the development
agreements and up to now we are waiting to be spoken to,"
Frederick Bantubonse, the head of Zambia's Chamber of Mines, a
think-tank on mining, told Reuters.
"This (stand-off) means that Zambia will not be credible to
foreign investors and it will discourage further foreign direct
investments," Bantubonse added.
Head of operations at the country's premier Konkola Copper
Mines (KCM), C.P Baid, said the proposed taxes would
'jeorpadise' KCM operations.
"The new taxes will make Zambia uncompetitive, unattractive
and will lead to destruction. There is need for meaningful
dialogue before new taxes are implemented," the state owned
Zambia daily Mail quoted Baid as saying to the parliamentary
(Reporting By Shapi Shacinda, Lusaka newsroom +