First Quantum Minerals – a Toronto-listed company mining copper in Zambia – does not expect the final value of the $8bn tax claim against it by the Zambia Revenue Authority (ZRA) to be “material”.
The claim for Zambian kwacha 76.5bn – equivalent to $8bn and comprising $6bn in in interest and $2bn in penalties on the $150m assessment claim on duties – relates to the import of capital items, consumables and spare parts for use at the Sentinel mine from January 2013 to December 2017.
In its March quarter results statement released on April 27 the company said, “a process for provision of all relevant documentation has been agreed between the company and the ZRA. Based on the work undertaken to date, the final value of the claim is not expected to be material.”
According to chairman and CEO Philip Pascal, “the process is approximately two-thirds complete by value and has not identified any material errors. The company unequivocally refutes the assessment, is committed to transparency and continued engagement with the ZRA on the issue.”
Like several other mining companies operating in a number of African jurisdictions – such as Randgold Resources/AngloGold Ashanti’s Kibali mine in the Democratic Republic of Congo – First Quantum is owed substantial amounts in value-added tax (VAT) repayments from government.
The quarterly report noted that the “amount of VAT accrued by the company’s Zambian operations at March 31, 2018 was $368m of which $271m related to Kansanshi. Management continues to engage in regular discussions with the relevant government authorities and considers that the outstanding VAT claims are fully recoverable.”
First Quantum said it ended the March quarter with $810m of net unrestricted cash and cash equivalents in addition to $1.67bn of committed undrawn facilities. “These, together with expected cash flows, support the company’s belief in its ability to meet current obligations as they become due,” the company stated.
