More Metorex complaints about taxes

Mining Weekly have more detail on the story reported yesterday of Metorex's ongoing theats to sue over the new tax regime.

They quote Metorex CEO Charles Needham: "We have looked at the effect of what they are proposing, and it more than doubles our current tax rate, which is unacceptable to us, we are protected by international law." At the same time, Needham claims they aim to negotiate a change rather than sue.

The story claims that Metorex's Development Agreement signed in 1997 under the Zambian Mining Industry Privatisation process, is governed by English law and was established in conjunction with the World Bank. I am not sure either of those phrases are meaningful. Zambia is a sovereign country with its own legal system (historically based on British law, but since independence, a different thing). The World Bank had no official role in the process. Can anyone explain the claims? Presumably they come from an interview between the journalist and Needham.

Needham continues. "The government understands that there is a development agreement that protects the companies, and they could potentially run into legal problems. And, if this were implemented, there are a number of new prospects that are not going to come on line, and I think is probably the closest would be Equinox. They are spending enormous capital to get that prospect up and running, and if that tax regime comes in, it is our understanding that they fall foul of their arrangements before they even start," Needham indicated.

"We are clearly of the view that the government is open to negotiation on this one and we are going back to government as a united force, (all the mining companies in Zambia) and we are saying we understand where you are coming from, and the prices are higher than we envisaged in our feasibilities, so what we would like to propose a variable tax rate at variable copper prices, which we think is equitable both to the fiscus and to the company," Needham said.

Again, these claims are factually incorrect. At a minimum, NFC-A and KCM have already 'accepted' the changes, whatever that means. And they are both now members of the Chamber of Mines (NFC-A having held out for a long time. There is no unified voice of the industry, whatever Needham wishes.

Needham added that the increase in funds going through to the government should go into the community closest to the company's mines.