Zambia Copper Miners Say Crippled by Unpaid $600 Million Tax Refund-Mines Body

By Nicholas Bariyo

Special to DOW JONES NEWSWIRES

KAMPALA Uganda--Copper miners operating in Zambia are facing a financial squeeze as they count the cost of a government delay in paying tax refunds amounting to $600 million, threatening output and jobs in the continent's second leading copper producer, the Chamber of Miners said Monday.

The dispute centers on a new tax law that requires all copper miners to present import certificates from destination countries before claiming sales tax refunds.

But the Chamber of Miners claim that there members can't provide documentation from importing nations because they sell to middlemen and don't know the final destination of the metal.

"Copper exports follow a thorough documented procedure which is verified at the Zambian port of exit…we hold that the documents are sufficient and valid," the chamber said.

The chamber said the dispute has forced the postponement of investments worth $1.5 billion in the mining industry. Some of the mines affected include Vedanta Resources PLC (VED.LN), First Quantum Minerals (FM.T), Glencore International PLC (GLEN.LN) Barrick Gold Corp. (ABX).

The chamber added that the delay is making it difficult for miners to pay salaries.

"Some operations are having difficulties in funding employees' salaries," the Chamber of Mines said in a statement. "Severe liquidity crisis faced by the companies has resulted either in incomplete inability or delayed payments to suppliers and contractors"

Last month, hundreds of contract workers at Konkola Copper Mines, a unit of Vedanta, rioted and destroyed company property during a protest over delayed wages.

Last week, Zambia's finance minister, Alexander Chikwanda, said that government was considering relaxing the rule, because it had proved hard to implement. In a July 15 letter to President Sata, Mr. Chikwanda said the rule was undermining the confidence in the country's economy.

A spokesman for Mr. Sata could not be reached for a comment.

Mr. Sata, has not appeared in public since mid June, amid speculation about his ill health but government officials insist that the president is well and in charge of the country.

The state tax body, Zambia Revenue Authority, said that although there are plans to negotiate the refund, government has to first reach settlements with some companies that have already taken the dispute to court.

Write to Nicholas Bariyo at [e-mail]

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