A large infrastructure entity based out of Asia, intended to acquire manganese mines in Zambia for export to their plants across Asia. They had identified the prospective mining parcels for prospecting and mining. DVS was engaged to understand the process of verifying the ownership of mining parcels and advising on the optimal business and tax efficient structure.
A team of specialists together with partners from Affiliate firms in Zambia visited Zambia and did a thorough duedilligence of the region and made the following observations to the clients:
- Zambia Development Authority (ZDA) was offering significant direct and indirect tax concessions for foreign investors engaged in value added activities in the region.
- Titles of mining land parcels were recently redrafted using scientific methods by the Ministry of Mines.
- Significant logistics constraints exist in the region which did not justify the cost of export raw materials.
Further based on the business model of the Client and the prospects of the region team DVS made the following observations:
- It makes a great business case for the Client to set up a ferro alloy plant in Zambia and take advantage of the fiscal incentives
- Given the complexities involved in mining licenses and ownership – it would make tangible business case for the Client to engage into long term production sharing contracts with mine owners and obtain the mines on lease / joint ventures instead of ownership.
- Investment Protection Agreement was negotiated and signed between the ZDA and the Client to ring fence assets from adverse political and fiscal developments in future.
The Client eventually accepted to our recommendation and has set up a multi-million dollar ferro alloy plant with significant investment concessions negotiated with the help of team DVS. The business structure was optimized to ensure ease of cash flows and lower taxation costs.