First Quantum dodges catastrophe as CEO moves to dispute tax bill
Shares in Canada’s First Quantum Minerals ( TSX: FM) rebounded slightly on Wednesday 21 March, dodging what was about to become their worst two-day drop in almost two years after its chief executive said he was ready to dispute a $7.9 billion bill for alleged unpaid import duties in Zambia.
Talking to investors and media during a call conference, Philip Pascall said his company refuted the charge and would work with the Zambia Revenue Authority ( ZRA) to clarify the matter.
The bill, which First Quantum was notified about on Tuesday, relates to $540 million of mining equipment imported for the company’s Sentinel mine. Zambia is asking the Vancouver-based company to pay $2.1 billion in penalties and $5.7 billion in interest, Pascall said.
Shares of First Quantum dropped 12% in Toronto Tuesday when trading was halted ahead of the company’s statement. They slumped as much 9.2% at the opening Wednesday 23 March before recovering slightly (+0.56%) to Cnd$18.10.
First Quantum, which operates the Kansanshi and Kalumbila mines in Zambia, accounted for more than half of the country’s copper output last year and is the largest individual taxpayer. The southern African nation, in turn, accounts for 84% of First Quantum’s revenue.
Other miners currently dealing with tax issues include Rio Tinto’s majority-owned subsidiary Turquoise Hill, which is said to owe Mongolia $700 million, and Barrick’s Acacia Mining, which hasn’t ruled out exiting Tanzania due to a $190 billion tax bill received last year.
First Quantum requested for 4-6months to conduct a review of the claim by the Revenue Authority. Zambia Revenue Authority will extend the Tax Audits to all mines in Zambia this year.