Zambia Mining Lobby Says Copper Output to Sink This Year 

(Bloomberg) -- Copper output in Zambia, Africa’s second largest producer, could fall by more than 10% this year because of new taxes the government has introduced, according to an industry lobby group.

While the focus in recent days has been on government plans to liquidate Vedanta Resources Ltd.’s local unit and bring in a new investor, this is a distraction from bigger problems, the Zambia Chamber of Mines said in an emailed statement on Thursday. Output, which hit a record 861,946 metric tons last year, could decline by as much as 100,000 tons in 2019 because of increased royalties and other taxes that were introduced in January, it said.

“The 2019 mining tax regime is distorting behavior,” said Zambia Chamber of Mines President Goodwell Mateyo. “It is forcing miners to do the unthinkable -- to cut production -- because many cannot afford to continue producing as before.”

The government’s move to liquidate Konkola Copper Mines this week has raised anxiety among investors, with Zambia’s currency and dollar bonds among the world’s worst performers. President Edgar Lungu had accused the company of lying about profits and cheating on tax, though said the process of bringing in a new owner for Konkola will be done in line with the law.

“The KCM story has created a social media frenzy, but it is distracting us from the real issue at play here,” Mateyo said. That is the “increasingly unbearable tax burden in a country where most mines are already regarded to be high-cost operations, not least because of the hundreds of millions of dollars in outstanding value added tax repayments that have eroded cash flow.”

Copper output fell by 11.3% to 195,244 tons in the first three months of this year from the previous quarter, the Bank of Zambia said on Wednesday. Zambia relies on the metal for over 70% of foreign exchange earnings.

To contact the reporters on this story: Matthew Hill in Maputo at mhill58@bloomberg.net;Taonga Clifford Mitimingi in Lusaka at tmitimingi@bloomberg.net

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net, Jacqueline Mackenzie, Alastair Reed

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