Erratic power supply coupled with unpaid for US$23 million owed in Value Added Tax forced Chambishi Metals Plc, a unit of Enya Holdings Ltd. to incur losses during the just ended financial year, Zambia’s Holding company-ZCCM IH says in a report.
ZRA has withheld over US$600 million in value-added tax repayments to mining companies that have failed to provide importer documentation required to qualify them for VAT reclaim on the zero-rated copper exports.
In its report ahead of the planned Annual General Meeting (AGM) on 7 October in Lusaka, ZCCM IH, which holds 10 percent shares in the copper, cobalt and nickel producer says the Copperbelt based Chambishi metals lost US$9.5 million as a result of erratic power supplied to the mines.
Copperbelt Energy Corp. buys power from the country’s utility, Zesco and sells an average 520 megawatts daily to mines operating on the Copperbelt, Chambishi Metals Plc inclusive, to run and produce various metals including copper for onward exports to the international metal market.
According to the report, ZCCCM IH adds that the erratic power supply affected copper cobalt and nickel production at the miner during the financial year ended 31 March 2014, the report said citing ZCCN IH acting Chief Executive Officer, Mabvuto Chipata.
Accordingly, the erratic power outturn resulted in the mine losing out 3, 300 tons of Copper and 410 tons of Cobalt said Mr Chipata adding that during the year under review, Chambishi Metals Plc faced two notable strategic challenge.
“Chambishi’s copper production performance continued to be adversely affected by power fluctuations, which the company estimated resulted in losses amounting to $9.5million, of which $6.8 million resulted from lost production of 3,300 tons of Copper and 410 tons of Cobalt,” Chipata added.
The problem was compounded by the delayed resolution of the monies owed to various mining companies in Zambia by Government in value Added Tax (VAT) and the miner is one of those affected by the withheld tax refunds.
According to the report by Chipata, Chambishi Metals Plc is owed $6.5 million by ZRA in audit claims carried out during the period 2006 to 2011.
Additionally, it is owed a further $23 million by ZRA as at March 2014 relating to a Value Added Tax (VAT) refund, all which have contributed to the poor liquidity of the company.
“The matter remains unresolved but given that Chambishi estimates that 90 percent of its input costs are VAT related and deductable, the suspension has had a material effect on its day to day operations,” Chipata stated in his report.
Non Ferrous Mining Africa (NFA)’s capital expenditure on the South East Ore Body (SEOB) project is estimated at US$61.6 million during the year ended 31 March this year.
The expected investment cost for the project was estimated at approximately US$830 million and the project is expected when completed in or around 2017, create about 5,000 jobs.
Loan financing of US$548 million is being arranged from the Export-Import Bank of China to partially finance the South East Ore Body project with the balance coming from internally generated funds,” Chipata adds of the project.
The SEOB project involves mining and processing of copper ore to concentrate stage for onward processing into finished copper cathodes at the Zambian smelters within Chambishi, Mufulira and Kitwe.
ZCCM-IH has 10 percent equity in Chambishi Metals Plc while Enya Holding BV (ENRC Group, which once owned Luanshya Copper Mines before abandoning it at the height of the global financial crisis, owns 90 percent in the Chambish project.
Chambishi is a mining, tolling and refining company with extensive copper and cobalt reserves. It has undertaken several improvement and expansion projects that will streamline its operations and increase both the cobalt and copper production.