Glencore halts copper projects in Zambia over tax row

Glencore’s Nkana mine, one of the largest in Africa.

Glencore’s (LON:GLEN) subsidiary in Zambia, Mopani Copper Mines, suspended Wednesday some of its planned $800 million copper mining projects in the country as the government is withholding at least $200 million in tax refunds owed to the firm.

Company Chief Executive Danny Callow told The Africa Report that some of its projects, including two new underground mining shafts to access deeper ore bodies at two existing mines are on hold.

The standoff marks a major setback for the miner, which is in the process of upgrading its copper assets in Zambia hoping to increase output by at least 50% by 2017. Glencore becomes the latest company to freeze investments in the country, following a similar move by First Quantum Minerals (TSX:FM).

The Canadian company, which operates the Kansanshi Copper Mine, Zambia’s largest mine by output, said in June it had put investments worth $1.5 billion on hold over withheld refunds.

The African nation, which last year lost its position as Africa’s top copper miner to Congo for the first time since 1998, began enforcing the rule last year in order to curb tax avoidance.

In August finance minister Alexander Chikwanda announced the government had decided to relax the rule because it proved very hard to implement, mainly because it involved documentation from importers outside the country’s jurisdiction.

However the government is still withholding about $600 million in VAT refunds owed to mining firms.

Mopani produced 120,000 tonnes of copper in 2012 and has planned to raise output to 170,000 tonnes within five years. The company wants to build two new shafts that it said would add 20-30 years to the life of its Mindola and Mufulira mines.

Other companies operating in the country include Barrick Gold (TSX, NYSE:ABX), Vale (NYSE:VALE), and Vedanta Resources (LON:VED).

Image by Arne Wilson | Creative Commons.