Message Ven 22 Avr 2011 07:43

MCM flawed and incomplete reports over copper receipts in Af

MCM flawed and incomplete reports over copper receipts in African largest metal producer
Friday, 22 Apr 2011
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Mopani Copper Mines, a company domiciled in Zambia and operating as a JV unit between Glencore AG International and First Quantum Minerals, described as flawed and incomplete reports over copper receipts in Africa’s largest metal producer.

Management of the company noted with deep concern and regretted the recent statements concerning flawed Mopani Copper Tax Report by some Non Governmental Organizations about its operations in Zambia, Africa’s largest copper producer.

Mr Emmanuel Mutati CEO of Mopani said that the reports lacked merit and that it was unfortunate that despite the company disputing the matter, the reports have remained published. On Mopani’s declared sales volumes being lower that expected, the company argued that the leaked document failed to properly account for the fact that about half of its copper metal it produced is derived from third party concentrates from other mines which are toll treated at Mopani operations.

It argued that Mopani receives a small annual fixed tolling fee per tone for producing metal from third party concentrates and that the company has always been audited every year by major international audit firm and one of the main audit procedures is the verification of sales.

On Mopani manipulating copper prices in transfer pricing to favor Glencore, the largest metal dealer, it disputed the reports arguing that all copper is sold at arms length as per prevailing London Metal Exchange prices. The failure to properly take into account third party concentrates from other mines has led to the erroneous conclusion in the matter.

Mr Mutati contended that on the reports about the gold and silver hedges being improperly recorded and used to impact taxable income said the miner produces very little of its own gold and silver. Gold and silver largely stems from third party purchased material and any hedges recorded were entered into the offset physical exposure. The net financial impact on Mopani, as a company on taxable income was zero. Failure to properly understand the business processes of Mopani led to the erroneous reports.

Mr Mutati defended the company stating that the authors of the draft report used general inflation rates and compared these to Mopani increases. It is however a documented fact, worldwide mining cost inflation has been running well above general inflation rates.

He said that at Mopani operations, embracing Mufulira, Nkana Mines among others the increase in operating costs has been due to high labour costs and electricity/energy charges inter alia. Again the costs are audited annually by its external auditors and to date, no evidence of wrong doing has been brought out to management’s attention. Mopani’s recovery rates on cobalt which in fact is at design level for this process and in line with historical recoveries achieved at Nkana.

Mr Mutati argued on cobalt which are infect on site facilities and tours of the operations were on offer and the Zambia Revenue Authority that audited the company, thanked Mopani in writing for its cooperation. The conclusions made by the authors based on errors and inconsistencies highlighted in the said report are a calculated move to tarnish the image and integrity of Mopani as a company. He stated that despite all the shortcomings, Mopani would not be deterred from its endeavor to contribute positively to the welfare of the local community where it operates and the Zambian economy as a whole.

Mr Situmbeko Musokotwane finance minister of Zambia and his mines counterpart Mr Maxwell Mwale have for a while now refused to discuss the matter arguing that they were waiting for the report for any comments, a move which has riled civil right campaigners and economic players.

Mr Savior Mwambwa executive director of the Centre for Trade Policy and Development said that his organization was disappointed at the government’s turn of a deaf ear on the matter. Recently it was reported that a United Kingdom based subsidiary of the world's largest commodities broker helped one of its African mining operations avoid paying tens of millions of pounds in tax.

Glencore is the giant fuel, metals and cereals trader based in the Swiss tax haven of Zug. The company, which owns a 73% stake in Mopani jointly with First Quantum through a company based in the British Virgin Islands, another tax haven.

According to data, Glencore, is presently preparing EUR 37 billion listing on the London stock market, the capital's biggest ever flotation. Recently concerned Non Governmental Organizations and other interest groups petitioned the company to restate its actual profits from the sale of copper in Zambia, Africa’s largest copper producer. They claimed that the transactions breach international rules ensuring there has to be an arm's length principle when it comes to sales between related parties.

Glencore said that all transactions were conducted at an arm's length basis and at internationally agreed prices. It is estimated that based on the audit, company's practices potentially cost the Zambian government up to EUR 76 million a year in lost corporation tax.

Ms Anna Thomas head of tax policy at ActionAid argued that the amount was significantly more than the EUR 59 million the UK government gives Zambia each year in aid. Glencore was founded by Marc Rich, the controversial oil trader several years ago who was accused of tax evasion by American authorities but was pardoned by President Clinton on his last day in office. The company which last year had a turnover of USD 145 billion is no longer connected to Rich.