Zambia-based copper miner, Konkola Copper Mines (KCM), on Tuesday said it will expand the use of its smelters after reaching a win-win solution with the Government of Zambia over future Value Added Tax (VAT) refunds.

After discussions with KCM, the Government of Zambia has announced that it will resume the refunding of VAT payments made to the Zambian Revenue Authority (ZRA). It did not state when this would happen.

Steven Din, CEO of KCM, commended the government, saying the company believed this is a very good decision by the Government. “It demonstrates the value of constructive dialogue and consultation. It is an important move to be made at a time when KCM and the industry are experiencing extremely difficult business conditions,” Din said.

The Government’s decision comes at a time when copper prices have fallen sharply since the start of the year, having fallen by 15 percent.

In addition to providing improved cash flows at a time of significant business challenges for the company, this decision will allow the company to resume purchasing third party concentrates for its smelter. During the period when VAT refunds were being withheld, it had become uneconomic for KCM to purchase copper concentrates from other mines in Zambia.

Limited to using concentrate from KCM’s mines, the smelter has only been operating at 50 percent of capacity. “With issues around repayment resolved, KCM will be able to profitably purchase copper concentrate from neighbouring mines for processing at its smelter”, Steven Din said.

“This will expand production and enable increased beneficiation of copper in Zambia,” he added.

But he said the company has a number of further challenges that need to be addressed. The issue of the refund of past VAT payment needs to be resolved, he continued. “We hope to see amendments to the new mineral royalties and electricity prices,” he concluded.