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Equinox Minerals to pay USD 36 million to the Southern Afric
Wednesday, 24 Mar 2010
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Some economic experts have suggested that Equinox Minerals Limited, owners of Lumwana Mine Plc in Zambia should pay about USD 36 million owed to the Southern African nation in taxes with interest.
This follows reports that Equinox Minerals Plc has proposed to defer the payment of USD 35.2 million it owes the government for 2009 until it eliminates about USD 1 billion.
According to local media reports, the experts wondered why the company that was given an opportunity to exploit the country’s resources could make such a decision.
Dr Stephen Kambani a Dean at the University of Zambia in the school of mines wondered at the decision and suggested that government should ask Equinox Minerals Plc to pay the debt owed in taxes with interest. He wondered how Lumwana Mines Plc could fail to pay taxes when copper prices on the international market were reasonably high.
Dr Kambani noted that it was difficult to understand why investors could deny making tax payments to a country which is in need of money to meet its social responsibilities. He suggested to government that there should not be exceptions and that Lumwana Mine be treated like other stakeholders who deferred or failed to pay taxes.
He said that “I hope the company reached an understanding with government before they reached such a decision. If they are going to defer making those taxes, they should also be ready to pay interest on that money. Even banks charged a penalty fee if their customer failed to failed to make a payment at a particular time.
Dr Kambani urged that government to ensure the mine paid interest on the deferred amount because if copper prices were to reduce on the international market, the same company would be quick to complain that the cost of operations had increased and eventually fail to pay the deferred amount.
Mr Roman Kambone an investment analyst said that the country appreciated the fact that Lumwana Mines has taken investment into Solwezi in northwestern Zambia but that did not give them the right to defer the payment of taxes. He observed that based on the projected cash flow, the mine was supposed to finish paying its debts in the next 4 years if prices continue to be around USD 7,500 per tonnee. He noted that the company was currently paying its debts from the cash flows instead of its profits hence they had the capacity to pay taxes to the government.
Mr Kambone noted that it was not right for a profit making corporate entity to put off paying taxes because it was obliged by law to do so. When the company was making its business plan, it should have made provisions for the payment of its debts and taxes. It is therefore important that government should not let them go ahead with the decision that they have made…there was no way that an investor can go into a country and exploit its resources and not pay for that right.
In releasing the financial statement for 2009, Mr Craig Williams president of Equinox Minerals Limited stated that the company believed that its Development Agreement with the Zambian government which overrides the current changes to the Zambian tax regime, including the timing and other related matters of such statements, were forward looking statements.