The Government of Zambia has no plans to seize the assets of Quantum Minerals Ltd. Further still; the copper producer intends to stay in the country. This, according to media reports, is despite the government’s move to wrest control of a rival miner.
Canadian-listed First Quantum has looked on nervously as the Zambian government appointed a provisional liquidator to run Vedanta’s Konkola Copper Mines (KCM), claiming KCM has breached the terms of its license.
The move has unnerved international miners concerned about rising resource nationalism in Zambia and neighboring countries.
First Quantum, scarred by having its operations in Democratic Republic of Congo seized in 2010, is embroiled in a dispute with the Zambian government after being handed a US $5.8Bn bill last year for unpaid import duties.
Among the international miners, First Quantum has the most to lose in Zambia, which accounts for 83% of production from the company’s operating assets this year, excluding a new project in Panama.
However, the company also has bargaining power as the most profitable miner in Zambia and the biggest tax payer. In 2018, it said it paid well over US $533m in taxes to the Zambian government, including royalties, income and corporate tax.
Two sources close to the company, who requested anonymity because of the sensitivity of negotiations, said First Quantum would stay, but would freeze investment and might put operations on hold.
Still, the company cannot mine at a loss, and, if necessary, would suspend production and cut jobs, shrinking the tax revenues Zambia desperately needs as its debts mount, one source said.
The Zambian government has increased taxes and said it will switch to a non-refundable sales tax, from a refundable value-added tax. First Quantum has said the tax changes will add about 10 cents per pound of copper in 2019 to its costs and between 15 cents to 18 cents per pound in following years.