Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Shares in Canada’s First Quantum Minerals (TSX:FM) rebounded slightly on Wednesday, dodging what was about to become their worst two-day drop in almost two years after its chief executive said he was ready to dispute a $7.9 billion bill for alleged unpaid import duties in Zambia.
Talking to investors and media during a call conference, Philip Pascall said his company refuted the charge and would work with the Zambia Revenue Authority (ZRA) to clarify the matter.
The bill, which First Quantum was notified about on Tuesday, relates to $540 million of mining equipment imported for the company’s Sentinel mine. Zambia is asking the Vancouver-based company to pay $2.1 billion in penalties and $5.7 billion in interest, Pascall said.
Shares of First Quantum dropped 12% in Toronto Tuesday when trading was halted ahead of the company’s statement. They slumped as much 9.2% at the opening Wednesday before recovering slightly (+0.56%) at 11:58AM to Cnd$18.10.
First Quantum, which operates the Kansanshi and Kalumbila mines in Zambia, accounted for more than half of the country’s copper output last year and is the largest individual taxpayer. The southern African nation, in turn, accounts for 84% of First Quantum’s revenue.
Other miners currently dealing with tax issues include Rio Tinto’s majority-owned subsidiary Turquoise Hill, which is said to owe Mongolia $700 million, and Barrick’s Acacia Mining, which hasn’t ruled out exiting Tanzania due to a $190 billion tax bill received last year.
10 Comments
Simon Booth
Why would you bother investing in Africa. Law doesn’t exist
Elite Leonard M'hone
Nonsense! Do you even know the history of first quantum? First Quantum has made all its fortune in Africa, Zambia in particular. How can you say that?
schnabel
I expect Chinese investors are behind this. China has invested heavily there and would likely love to, effectively, expropriate the best mines. I don’t think any African government wants to mess with the Chinese!
Michael O'Neill
Are you suggesting that the Chinese do business like the Americans – with Economic Hit Men holding a wadge of cash in one hand and a gun in the other? Not everyone needs unfair advantage to win
patentbs
The #1 takeaway from Africa the last few years is — when you payoff somebody, be sure it is the right somebody! When the new guy comes along he wants his too. That is how ‘fair play’ works there.
Guest
You want to play in unstable places? Expect to pay! The Democrats would say it is Russia meddling, but it is really China.
Michael O'Neill
The only country is on record as playing like this is the United States and corrupt African regimes themselves
Tschiswaswa Humphrey
I know fqml to be a very responsible organization. I don’t think the company can get into such misdealings
Michael O'Neill
Yes this is reading like it came as a surprise
That is not how a big tax bill should be handled
Advance notification to the company which then disputes it or makes provision is the way to have done this
Michael O'Neill
“First Quantum dodges catastrophe”
Should this not read:
“First Quantum commences tax bill negotiations”
Or
“How did this come as a surprise?”