The Zambia Chamber of Mines has defended the controversial agreement that ZCCM-IH has entered into with First Quantum Minerals (FQM) to convert its dividend rights and economic value in its 20 percent equity in Kansanshi Mining Plc into a life of mine royalty.
ZCCM-IH has entered into a transaction with First Quantum Minerals (FQM) to convert its dividend rights and economic value in its 20 percent equity in Kansanshi Mining Plc into a life of mine royalty.
According to the transaction details, ZCCM-IH has agreed to enter into an agreement and drop criminal charges against Kansanshi Copper Mine directors, as part of the conditions precedent for FQM to declare a dividend in the sum of the amount that the government had been claiming from the mining giant.
On 23 October 2019, ZCCM-IH reported a suspicious transaction entered into between Kansanshi Mining Plc and First Quantum Minerals Finance Limited to the Zambia Police Service.
But Zambia Chamber of Mines Chief Executive Officer Sokwani Chilembo said the deal will be good for the mining industry and good for the country.
Mr. Chilembo has condemned stakeholder’s opposing the ZCCM-IH/FQM deal labeling them as sensationalists who are misrepresenting the FQM and ZCCM-IH agreement.
“Chamber of Mines slams sensationalist misrepresentation in commentary on FQM and ZCCM-IH agreement. Point scoring behaviour by pundits is willfully misrepresenting the benefits and history of a deal that will be good for the mining industry and good for the country. The negotiations between ZCCM-IH and First Quantum to provide ZCCM-IH with royalty income from Kansanshi mine have been ongoing for the past three years and were initiated by the previous administration. ZCCM-IH’s 2020-2026 Strategic Plan, which sets out the investment company’s intention to secure royalty revenue streams from its investment portfolio, was likewise devised during the tenure of the previous administration, received shareholder support, and has been in the public domain for years,” Mr. Chilembo said.
“Given this, one could have expected to see a broad apolitical support for this announcement, rather than the barrage of attacks we have seen in the media. So, this shocked outrage is misplaced, and being mostly fuelled from quarters that were privy to the historical background of the negotiations. The agreement that FQM and ZCCM-IH have entered into calls a halt to the tit-for-tat legal disputes between government and its main mining investor, that have caused great reputational damage, and come at a great cost for both parties in time, money and effort,” said Mr. Chilembo.
“Now the partners in Kansanshi can get back to the business of mining, and deliver upon the very positive and long-awaited development of the s3 expansion at the mine. This cessation of hostilities is extremely important for our optics in the global landscape and will be a comfort to other potential investors – because make no mistake, we need many, many more investors if we are to realise the objective of delivering anything like 3 million tonnes of copper a year,” Mr. Chilembo continued.
According to the Chamber of Mines, the 3.1% revenue-based royalty secured by ZCCM-IH in its negotiations is at the top end of the range normally seen for this type of arrangement.
“This is a good deal for ZCCM-IH, when you look at the international comparisons. They have secured a regular, consistent source of income from Kansanshi which will allow them to deliver on their strategy of becoming a real player in Zambia’s mining industry, throughout the mining value chain – and that is what ordinary Zambians need to see. It’s time we stop misrepresenting the facts, otherwise our opinions – and the quality of our public debate – will be detached from reality. We must start getting behind the industry as an engine for national development, rather than just scoring points for points’s sake,” Mr Chilembo said.
Meanwhile, Chief Government Spokesperson Chushi Kasanda this week refuted reports that ZCCM-IH has sold its shares in Kansanshi Mining Plc, saying the parties have simply entered into a new arrangement that provides a more beneficial revenue stream.
Kasanda says ZCCM-IH will continue to hold its shares in Kansanshi and will also continue to have pre-emptive rights in respect of the mining company.
ZCCM-IH recently announced that it had entered into a transaction with First Quantum Minerals (FQM) to convert its dividend rights and economic value in its 20 percent equity in Kansanshi Mining Plc into a life of mine royalty.
According to the transaction details, ZCCM-IH has agreed to enter into an agreement and drop criminal charges against Kansanshi Copper Mine directors.
No Sir. It is our copper and gold and so the 3.1% is far from being a good deal for the people of Zambia. Let us attempt to have a much more informed perspective of all deals we enter into and let us not shy away from maximizing benefits for us. There is too much capital flight.
You have 100% of Mopani. Let us see how you maximize benefits for Zambians at Mopani first, then you can talk about other assets.
That 3.1% does not include jobs created, supplier and other business opportunities.
1 – From 2009 to 2021 ZCCM-IH received $337 Million in Dividends.
2 – For the same period ZCCM-IH would have received $672 Million in Royalties .
Greediness is what is killing Africans. You have a guaranteed stream of income and yet you are failing to do simple mathematics to come up with which is a better decision. I think this the proposed model is way to go not these unreliable dividends which are not guaranteed. Moreover you are a minority hence can’t force a dividend declaration.
No Sir, you are misplaced. You are suggesting that ZCCM-IH or Zambia will get 3.1% of the revenue generated at the International market prices? think again. FQM like all other multi-nationals sale to their own subsidiaries, they chose which company will declare the profits, usually in tax benefial jusrisdictions. Ever heard of “inter-company” transfers? They are all doing it. So forget about benefits, we are screwed gain
The chamber of mines as the name suggests have always been on the side of the minning firms, for reasons best known by themselves.
3.1 percent mineral royalty might be a good figure for them chamber of mines and Government but in the real world that’s peanuts, 3% out of 100%.
Instead of ever looking towards investors Africa must find ways to fund these projects themselves if they hope to benefit meaningfully from these minerals.
100% would be nice, and we all want it, but until we find ways to fund these projects we can’t make 100% happen. Therein lays the problem. Wishing alone is not enough.
The problem is the same. 3.1% of total sales aka royalty tax in reality turnover tax.
Profit (Z)=Total Sales (X) less (Cost of Production(Y) +overheads) .
Solve for (X). Remember VAT Rule 18? the mining houses refused rules to share export sales invoices to support VAT refunds claims.
Is this a pre-bargain for the mentioned criminal case? Aishi, Maybe there is more than meets the eye.
The complexity still remains as long as we have unknown variables.
No abashing point scorers just explain and add more clarity to the complex deal. why “turnover tax” npw and not before? did the negotiators evaluate which model produced maximum value?
$337 Million in dividends vs $672 Million in royalty calculated over the same period.