HomeBattery metalsAlleged unpaid export duties halt Katanga Mining’s import and export

Alleged unpaid export duties halt Katanga Mining’s import and export

Less than a week after Glencore-owned Katanga Mining announced the temporary suspension of cobalt export from its Kamoto mine, the importing or exporting of any material or production, including copper, has been suspended owing to alleged failure to declare duties on at least 6 650 t of copper.

The Direction Générale des Douanes et Accises (DGDA) in the Democratic Republic of the Congo issued an internal instruction on 9 November 2018, temporarily preventing Katanga Mining’s 75% owned subsidiary, Kamoto Copper Company (KCC), from importing or exporting any material or production, including copper production, as a result of KCC’s alleged failure to declare and pay duties on the export of at least 6 650 tons of copper in December 2014 and January 2015.

Both before and after the issuance of the internal instruction, KCC has continued to produce copper at normal levels and is in discussions with the DGDA with a view to resolving the matter and resuming imports and exports.

The dispute with the DGDA arose as a result of Katanga Mining’s previously disclosed overstatement of copper cathode production by 6 650 tonnes in December 2014. This overstated cathode production was provisionally invoiced in the amount of US$43 million on 31 December 2014. However, as disclosed in the Company’s restated consolidated financial statements for the years ended 31 December 2016 and 2015, the restated financial statements eliminated the recording of the overstated cathode production and the provisional invoicing of $43 million.

Although the 6 650 tons of copper cathode at issue were not produced by KCC in 2014 or exported in 2015, the DGDA claims that KCC failed to pay export duties on the export of these copper lots. The DGDA proposes to levy export duties and significant penalties on KCC as a result of the alleged failure to pay export duties.

KCC says that given that the copper cathode production at issue did not exist and that the copper lots were not exported, its strongly asserts that no export duties are owing on the overstated (not produced and not sold) copper cathode.

KCC is engaged in discussions with the DGDA with a view to resolving the dispute.

Although Katanga Mining is optimistic that the parties will reach a satisfactory resolution in the coming days to allow imports and exports to continue, unless the dispute with the DGDA is resolved and KCC’s imports and exports are permitted to resume in the near future, the suspension of imports and exports is expected to negatively impact the company’s production and revenue during the suspension.