Production at First Quantum Minerals’ Sentinel Mine for the first quarter of 2021 was broadly in line with the company’s expectations, with production increasing by 3% year-on-year, according to the company’s latest results announcement to shareholders.
Innovation helped ensure robust management of costs, reducing the unit cost of production, but savings were outweighed by a dramatic rise in mineral royalty tax as a result of high world copper prices that pushed the country’s largest taxpayers to the highest level of the tiered tax system.
The 58,252 tonnes of production during the quarter at Sentinel in Kalumbila was despite repair work on the mine’s ball mill limiting throughput, and heavy rainfall recorded in North Western Province.
Sentinel’s total production amounted to 28.4 percent of the mining company’s global production of 205,064, while the mining unit’s total copper sales volume increased by 45 percent.
“Sentinel Mine delivered in line with the company’s overall plan despite the heavy rains experienced in the quarter. With our continued low costs and the strong copper price, we generated significant cash flow,” said FQM Country Manager General Kingsley Chinkuli.
The continued increase in copper production at Sentinel is a direct result of First Quantum’s investments into its operations, said Gen. Chinkuli. The investments have led to a significant reduction in the unit cost of production.
“In our operations, we aim to be efficient while also living up to the expectations of all our stakeholders,” he said.
In the third quarter of 2020, Sentinel achieved its highest ever quarterly production of 70,829 tonnes and recorded low cash costs.
Gen. Chinkuli however noted that the good performance by Sentinel continues to be impaired by the current tax regime, which is ranked as the least competitive in the world by consulting firm EY.
Zambia uses a sliding scale for the determination of mining royalty tax rates, linked to the prevailing copper price. The scale is adjusted so that royalties are paid at higher levels as commodity prices climb, and are reduced as prices fall.
Stakeholders have called for the mineral royalty tax to be tax-deductible for mining firms as making it non-deductible, as Zambia does, amounts to taxation on revenue not received. Zambia is the only mining jurisdiction not allowing a deduction for these costs.
Gen. Chinkuli cautioned that for the company to continue being a major contributor to the Zambian economy, the government needed to put in place a competitive mining sector tax regime to attract foreign direct investment that should seek to adequately compensate the country while remaining internationally attractive and competitive.