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Glencore Idles Zinc Mine in Zambia Over Value-Added Tax Dispute

This content was published on October 2, 2014 - 15:37

Oct. 2 (Bloomberg) -- Glencore Plc, the world’s third- largest miner by market value, has halted operations at its Zambian zinc mine because of withheld value-added tax refunds owed to the company.

“Sable has been forced to place its operations under care and maintenance due to the current local economic environment and the cash-flow restrictions caused by the withholding of VAT refunds,” Baar, Switzerland-based Glencore said in an e-mailed response to questions.

Earlier this week, Glencore’s Zambia copper unit said it suspended part of a $800 million plan to increase production of the metal by 50 percent because it is owed more than $200 million in refunds. Mopani Copper Mines Chief Executive Officer Danny Callow said this may pose risks for the job security of the company’s 20,100 workers.

The Zambia Revenue Authority has held back on paying mostly mining companies more than $600 million in VAT refunds, because it says exporters haven’t complied with a rule requiring import documents from the countries the products end up in. The mines say they sell to traders and don’t know the final destination of their metal.

Glencore’s Sable Zinc Kabwe Ltd. had 182 full-time workers and 25 part-time employees, David Littleford, general manager at the operation, said in a letter to the Zambia Revenue Authority dated July 23. The VAT refunds being withheld were straining cash flows, he said.

“Sable is close to exhausting all possible sources of funding to finance its operations,” Littleford said. “Should the matter not be resolved, Sable could be forced to place its entire operation under care and maintenance.”

To contact the reporter on this story: Matthew Hill in Lusaka at mhill58@bloomberg.net To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net John Viljoen, Ana Monteiro

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