Sunday, December 15, 2013

Magande questions removal of duty on copper concentrates
By Chiwoyu Sinyangwe
Mon 28 Oct. 2013, 14:01 CAT

NG'ANDU Magande has questioned the rationale behind finance minister Alexander Chikwanda's decision to remove 10 per cent excise duty on export of raw minerals.

On October 4, 2013, the government announced that it was suspending the 10 per cent duty slapped on the export of unprocessed copper and several other minerals in raw form for a year.

The government introduced the export tax on raw metals in November 2011 in a bid to encourage the development of local industry and to add value to the economic chain in the country's economic mainstay.
The tax made exporting copper concentrates less profitable, encouraging mines to use local smelters.

But according to Statutory Instrument No 89, which was signed by Chikwanda, the 10 per cent duty slapped on the export of unprocessed copper and several other minerals had been shelved until the end of September 2014.

"The export duty on ores and concentrates is suspended for free," the SI read in part.

"The regulation shall cease to have effect on 30th September 2014."

SI 89 comes on the back of the 2014 national budget, which proposes that effective next year, a 10 per cent export duty on semi-processed metals and base metals be widened to include copper blisters.

Commenting on the development, Magande, who is Zambia's longest-serving finance minister, said the government needed to tell the world what they wanted to do with the mining sector.

"It is a question of political will," Magande said in an interview.
"Our friends in the PF are not that determined to impose things that are going to help the country create wealth from our copper and get our people to do some jobs that are not complicated."

He said by allowing the export of copper concentrates and ores, the government would be undoing what Zambia had achieved under the MMD government to boost local smelting capacity as a way of adding value to raw copper exports.

"What is the philosophy of the PF government on mining?" asked Magande.

"Are they looking to value addition and processing in our country of the ores and raw materials. If we can't process all the copper into wires like at ZAMEFA, atleast, we should be getting some semi-processed copper as a way of industrialisation and creating jobs for our people."

According to SI 89, concentrates and ores the government has allowed to be exported include copper, cobalt, aluminum, nickel, lead, zinc, tin, chromium, tungsten, uranium or thorium, molybdenum, titanium, niobium, tantalum and vanadium.

SI 89 also covers concentrates and ores for precious stones such as silver and platinum.

On October 21, African Rainbow Minerals spokeswoman Jongisa Klaas was quoted by Bloomberg as saying: "We approached the Zambian government, asking for the 10 per cent export tax to be waived and we are appreciative of the government granting it to us."

African Rainbow Minerals jointly owns Lubambe Copper Mines with Brazil's mining giant, Vale, while ZCCM-Investment Holdings holds a 20 per cent stake on behalf of the government.

Lubambe, which was previously called Konkola North Copper Project, is a US$450 million copper mining venture that targets to produce 2.5 million tonnes of ore per annum with an initial production of 45,000 tonnes of copper per annum.

Chikwanda, before being appointed finance minister in September 2011, was instrumental in the setting up of Lubambe, which commenced producing copper concentrates on October 4, 2012.

African Rainbow Minerals was founded by Patrice Motsepe as South Africa's first black-owned mining company, although he is thought to have benefited from political connections when the ANC took over power and enacted laws on black ownership of industries.

Motsepe is currently the executive chairman of African Rainbow Minerals.

Separately, First Quantum Minerals, last month, said it was being "choked by stockpiles of unprocessed concentrates" due to inadequate treatment facilities in the country.

FQM, which operates Kansanshi Copper and Gold Mine in Solwezi, claimed it had stockpiled about 75,000 tonnes of unprocessed copper concentrate worth around US$133 million, which it could not export due to the 10 per cent levy on unprocessed mineral exports.

Previously, FQM used to send its concentrates for treatment to Konkola Copper Mines (KCM)'s Nchanga Smelter and the Chinese-owned Chambishi Copper Smelter.

Last July, authorities in the Democratic Republic of Congo raised taxes on copper and cobalt concentrate exports by two-thirds as it planned to ban the practice next year.

Much of the concentrates were processed by Zambian smelters.
On October 23, KCM strategy and business development director Brad Gnanasivam said the company's state-of-the-art smelter, which is the biggest in the country with a capacity of 300,000 metric tonnes copper cathodes, was operating at 50 per cent surplus capacity due to lack of feedstock.

Gnanasivam said the Outokumpu direct-to-blister smelter was very specific with the concentrates that it needed to be fed with and that it was important that local concentrates be blended with those sourced from Democratic Republic of Congo, which were richer in mineralisation.
Chikwanda proposed in the 2014 national budget to introduce a 15 per cent customs duty on copper blisters, copper powders and flakes, and lamellar structures and flakes.

According to the Zambia Revenue Authority, the customs due was intended to harmonise the tariff treatment of similar products and curb miscalculation and consequence avoidance of paying customs duty.

But Gnanasivam said export duty was inconsistent with SI 89, which repealed levy on copper concentrates.

"But we have an unusual situation," Gnanasivam said last week when he, Lubambe chief executive officer David Armstrong and Chibuluma Mines general manager Jackson Sikamo appeared before the expanded Parliamentary Committee on estimates representing the Chamber of Mines of Zambia. "We have a smelter that is smelting blisters that are 98 per cent copper, now suddenly has to pay 10 per cent tax but a producer of concentrates pays no tax. So, we are in an ironic situation where we are exporting a 30 per cent copper product at zero tax and you cannot export 98 per cent product because there is a tax."

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