CORRECTED-UPDATE 1-Zambian president seeks to end mining tax rows

Tue Feb 3, 2015 12:13pm EST
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(Corrects to show Barrick announces suspension, not yet carried out (para 7))

LUSAKA Feb 3 (Reuters) - Newly-elected Zambian President Edgar Lungu has directed the government to "promptly resolve" a row with mining companies over new royalties and VAT refunds, the presidency said in a statement on Tuesday.

The presidency also said Finance Minister Alexander Chikwanda would discuss the issues with mining companies this week. The simmering disputes over taxes have threatened investment in Africa's second-biggest copper producer.

The statement said the president wanted "an amicable settlement that must end in a win-win outcome for both the mining companies and the people of Zambia."

Zambia's mining tax tussles, coming at a time when copper is near 5-1/2 year lows and economic growth in the southern African nation is faltering, are two-fold.

One dispute involves $600 million in Value Added Tax (VAT) refunds which the industry says is being withheld by the government. The second centres on a hike on royalty rates to 20 percent from 6 percent for open pit operations and those for underground mines to 8 percent from 6 percent.

Zambia's Chamber of Mines said in December the new royalties would result in shaft closures and 12,000 jobs losses.

The plan has already prompted Toronto-based Barrick Gold Corp. to announce it would suspend operations at its Lumwana Copper Mine, which supports nearly 4,000 direct jobs in the area.

Lungu also urged the central bank to cut interest rates to stimulate economic growth. He won a tight presidential election last month on pledges he would create jobs and reduce poverty. (Reporting by Chris Mfula; Writing by Ed Stoddard; Editing by James Macharia)