FIRST Quantum Minerals (FQM) mining firm has cautioned shareholders that the US$650 million expansion project at Kansanshi Mine can only go ahead if the company is confident of a competitive fiscal regime, which will in turn dictate capital availability.
FQM Country Manager General Kingsley Chinkuli said that the most important element of restarting the project and making Zambia’s mining sector attractive to investors was the need for a competitive tax and royalty regime, and that fundamental to long-term private sector investment was knowing what costs would be for the life of the investment.
According to a statement issued to Techwatch News today, the mine plans a massive investment that will double copper out and extend the life of Kansanshi mine to 24 years.
“Mines across the world need constant investment, in hardware, exploration, and modernisation. When the global economy presents challenges, as it can be depended on to do so, whether as part of the global financial crises or else through the so-called commodity super-cycle, it falls to governments to make their jurisdictions the most attractive in which to place their investment,” said General Chinkuli.
He further said that the mining firm’s annual tax contributions without S3 expansion and MRT non-deduction remaining in place, is estimated to be around US$200 million, but if the expansion project goes ahead and MRT non-deductibility is removed, the tax contributions could be well in excess of US$300 million
“Or possibly much higher depending on market conditions. Indeed, tax contributions over the five-year period are expected to be up to 45 percent higher with the S3 project, but this would require a competitive tax code for its approval,” he said.
Mr Chinkuli said once the project has been completed in 2024, the mine is expected to be producing between 220,000 and 280,000 metric tonnes of copper per annum from 2024 to 2028 but this is contingent on some badly needed tax reforms in the mining sector.
“We have seen in recent years many opinions and lots of conjecture on the future of the Zambian mining sector as it emerges, bruised but alive, from one of the most severe commodity down-turns of recent generations. So, today, the sustainability of the mining-sector is as important as ever. The time now has come to start answering questions such as, how do we keep the foreign investors we already have? And how do we use them to attract others? Mr Chinkuli wondered.
FQM paid over K7 billion in taxes and royalties to the government in 2018, representing almost 40 percent of total payments made by the extractive industry, cementing its position as the nation’s largest taxpayer.