First Quantum Invests $3 Billion in Zambian Copper Mining After Paying $2 Billion in Taxes

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--When it begins operating at optimal levels, First Quantum Mineral's (TSX:FM) (FQM) (Vancouver, British Columbia) new Sentinel mining project in Zambia is expected to produce 300,000 tons of copper per year. FQM plans to invest a total of $3 billion in both Sentinel and a copper smelter at the Kansanshi mine, which is targeting an annual production of 400,000 tons of copper by 2015. The Kansanshi mine is FQM's leading Zambian operation.

The new smelter will be shared by Sentinel and Kansanshi to produce 300,000 tons of copper concentrate a year. Sentinel will supply 67% of the ore input and Kansanshi 33%. Sentinel claims to have one of the largest copper reserves in the world, with estimated reserves of 1 billion tons of ore grading 0.51% copper.

Since Kansanshi became profitable in 2005, FQM has paid more than $2 billion in taxes in Zambia. The company pays a mineral royalty tax (MRT) at a rate of 6%, which is calculated on revenue after deduction of the MRT. FQM also pays a profit tax at 30% of profits, with a further variable profit tax of up to 15% also charged on profits.

This has created a balanced relationship between the mining company and its stakeholders and the government. A spokesman said FQM recognizes this need for balance and will continue to pay taxes at Kansanshi and the Sentinel mine.

For related information, see February 12, 2013, article - Zambia Aims for 1.5 Million Tons Copper Production, and Lays Down the Law, and August 28, 2013, article - ABB Substation for Kansanshi Mine Expected to Improve Zambia's Power Network.

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