FIRST Quantum Minerals has agreed to convert dividends from its Zambian copper mine Kansanshi to a revenue royalty, the Canadian firm said today.
The agreement follows fiscal changes implemented by Zambian president Hakainde Hichilema shortly after his election in 2021 in which royalties were made tax deductible.
In terms of the agreement, Zambia’s government-controlled ZCCM-IH will receive 3.1% in a revenue royalty from the mine which is forecast to produce between 140,000 and 150,000 tons for the financial year ended December 31.
First Quantum said ZCCM-IH would continue to be represented on the Kansanshi Mining board to “ensure full visibility and transparency in respect to KMP’s future operations”.
“We are pleased to enter into this new arrangement for the benefits flowing from the Kansanshi mine,” said Tristan Pascall, CEO of First Quantum in a statement today.
The royalty-for-dividends agreement comes ahead of the proposed $1.25bn expansion of Solwezi section, known as the S3 project, at Kansanshi. This was announced in May when a total of $1.35bn in projects for Zambia were unveiled including the final $100m installment on its $250m Enterprise nickel project in Kalumbila.
“We look forward to continuing the collaborative relationship with ZCCM-IH as we advance KMP,” said Pascall.
The agreement with the ZCCM-IH is further evidence of a thawing of relations between First Quantum and the Zambian government following Hichilema’s election. Two months after his election he reformed the country’s tax regulations in its national budget.
The S3 project will extend the life of Kansanshi until the 2040s, and increase copper and gold production by around 25%. The project will also add approximately 800 permanent jobs, and a further 1,800 during the construction phase.
“Crucially, it also safeguards the futures of the 8,500 people already employed at Kansanshi,” First Quantum said earlier this year.
The Enterprise mine will produce some 10,000 tons of nickel concentrate a year. According to First Quantum it will make Zambia a “pre-eminent nickel producer” supplying manufacturers of batteries for electric vehicles. The mine is expected to be operational within 12 months’ time and employ about 700 full time staff.