IMF urges Zambia to resolve tax issues with mining companies

LUSAKA, Dec 19 (Reuters) - The International Monetary Fund has urged Zambia, Africa's second-largest copper producer, to quickly resolve issues with mining companies over value-added tax refunds and an increase in royalties.

Lower world copper prices and the announced shift to a royalty-only mining tax regime with high rates were likely to adversely affect the companies, the IMF said in a statement late on Thursday.

Barrick Gold Corp said on Thursday it would suspend operations at its Lumwana copper mine in Zambia after laws were passed raising the royalty rate on open-pit mining operations to 20 percent from 6 percent.

"The authorities indicated that they are looking to assuage the concerns of mines and prevent closures," the IMF said after a mission to Zambia.

Greater policy stability and consistency would help anchor confidence in Zambia as an investment destination, it said.

"It will be important to enhance dialogue between stakeholders, particularly between government and the mining sector, where there is a need to build mutual trust."

Zambia's outlook was buoyed by several mining and electricity supply projects that were about to come on stream, the IMF said.

Other mining companies operating in Zambia include First Quantum Minerals, Vedanta Resources (Other OTC: VDNRF - news) and Glencore . (Reporting by Chris Mfula; Editing by Ed Stoddard and Larry King)