Zambia Vedanta unit halts operations at underground mine on tax concerns

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Konkola Copper Mines PLC workers wait in a lift before going to work underground in Konkola, April 12, 2005. REUTERS/Stringer

as Zambia says audit shows mining firms in arrears to government

LUSAKA (Reuters) – Zambia’s Konkola Copper Mines (KCM), majority owned by Vedanta Resources, suspended operations at its Nchanga mine following the introduction of an import duty on copper concentrates, the company said.

Zambia, Africa’s No.2 copper producer, introduced new mining duties, increased royalties and plans to replace Value Added Tax (VAT) with a sales tax by April to help bring down mounting debt.

KCM said in a note to employees, seen by Reuters, that operations at the mine would be suspended from Jan. 4 due to low availability of acid as a result of rationalised operations at its Nchanga smelter.

Operations at the smelter were downsized due to low availability of concentrates after the government introduced an import duty on concentrates, KCM said.

“The introduction of 5 percent import duty on concentrates has made the smelting of imported concentrates commercially unviable,” the company said.

KCM said it needed to import concentrates in order to meet smelter capacity and blending requirements.

The Chamber of Mines said last month mining companies may lay off over 21,000 workers due to reduced capital expenditure over the next three years due to the changes.

Meanwhile the Zambia Revenue Authority (ZRA) said on Friday an audit shows mining companies owe the government more than the state is due to pay them in tax refunds.

Mining companies have been demanding Zambia pay the $550-$600 million due to them in Value Added Tax (VAT) refunds.

“When we put together what we owe the mining companies compared with what they are owing, you find that on the balance of numbers they are actually owing more,” ZRA Commissioner-General Kingsley Chanda said at a media briefing.

Chanda did not say how much mining companies owed the state but said it included penalties and interest. Mining companies pay government royalties and tax.

Reporting by Chris Mfula; Editing by Joe Brock

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