FIRST Quantum Minerals said it was working to resolve a dispute with the Zambian authorities over compliance with a new electricity tariff which has resulted in power cuts to the firm’s copper smelters in the country.
But the Toronto-listed firm gave little other evidence of how it intended to come out of the stand-off, although it argued that it had letters dated June 29 and August 4, 2017 in which it had agreed to pay a flat 9 US cents per kilowatt hour provided Zambia’s state-run power company, Zesco, allowed it to source 200MW of power from other suppliers.
First Quantum also said it had offered to build more capacity in the interconnector from Zimbabwe to Livingstone in Zambia. “Company representatives are currently working to resolve the situation,” it said in a brief update.
First Quantum and Glencore, which operates Mopani Copper Mines in Zambia, are said by the Zambian Energy Minister, David Mabumba, to be the only two mining companies operating in Zambia which had failed to pay the new rate of 9c/kWh compared to a previous rate of 6c/KWh.
Zesco has subsequently cut supply to First Quantum’s Sentinel mine from 155MW to 110MW while at Kansanshi mine, power had been reduced from 187MW to 133MW. Copperbelt Energy Corporation, which buys power from Zesco and sells to the mines, had also slashed supply to Mopani Copper Mines from 190MW to 94MW.
“Those mines that are not paying (the new tariff), we will give them the amount of power equivalent to the new tariff at 9.3 cents/Kwh,” Mabumba is quoted to have said in an article by Reuters.
“If the other customers are paying, why should we be subsidising the industry? I think that will be unfair. The mines that are not paying, they want to blackmail the government,” he said.
The cut to electricity supplies is the latest in a long line of setbacks experienced by First Quantum in Zambia which has been one of the largest investors in the southern Africa country over the years.
One of the latest disputes was in May when Zambia’s state investment firm, ZCCM Investments Holdings took First Quantum to the Lusaka High Court accusing the company of committing fraud and seeking as much as $1.4bn.
The Zambia government’s legal claim related to alleged fraudulent loans made by Zambian unit Kansanshi Mining to First Quantum – an allegation First Quantum CEO, Philip Pascall described as “vexatious and untrue”. Zambia president, Edgar Lungu called on ZCCM Investments to drop the case.