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FQM refutes ZRA’s tax fraud claims as stocks fall 12%

Filed under: Business,Latest News |
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First Quantum Minerals Ltd (FQM) has confirmed that the Zambia Revenue Authority (ZRA) have slapped it with a K76.5 billion ($8.04 billion) bill in unpaid import duties, but has strongly denied it owes ZRA the funds.

And First Quantum’s stock dropped 12.4 percent to C$18 on the Toronto Stock Exchange following accusations of underpayment of customs duties made by Zambia’s tax collection agency.

On Tuesday, ZRA said it had uncovered a five-year, $8 billion tax scam at an unspecified “prominent mining company”.

ZRA corporate communications manager Topsy Sikalinda disclosed in a statement that the country’s tax collection agency had issued a preliminary tax assessment of K76.5 billion ($8.04 billion) to the company for classifying imported spare parts and other consumables as mining machinery, which attract no custom duty.

Sikalinda said the company had been avoiding paying import duty on items other than mining machinery, which ranges from 15 to 25 percent, adding that the company had been engaged in the conduct for the last five years.

However, in a statement attributed to FQM president, G. Clive Newall, the mining giant, which owns two copper mines in Zambia and has a market value of $11 billion, rubbished ZRA’s assessment but pledged to work with ZRA to resolve the issue.

“The Company confirms that it is in possession of a letter from the ZRA, dated March 19, 2018, noting an assessment for import duties, penalties and interest on consumables and spare parts of 76.5 billion Zambian kwacha,” Newall stated. “The Company unequivocally refutes this assessment which does not appear to have any discernible basis of calculation and will continue working with the ZRA, as it normally does, to resolve the issue.”

Meanwhile, Reuters reports that FQM’s stock dropped 12.4 percent to C$18 on the Toronto Stock Exchange before it was halted.

Reuters further quotes TD Securities analyst Greg Barnes as saying in a note to clients that he found it “difficult to reconcile the ‘misstatement’ of around $8 billion of imports with First Quantum’s reported operating and capital costs, which were around $8 billion for the same period.

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