JOHANNESBURG (miningweekly.com) – Lonmin has vehemently denied allegations contained in recent media reports published by the Mail & Guardian and supported by the Alternative Information and Development Centre (AIDC) economist Dirk Forslund that the platinum producer had shifted profits to low-tax operations at which there was little genuine commercial activity in a bid to avoid tax payments.
“[The claims] are false and misleading. Lonmin pays tax fully and properly in all jurisdictions in which it operates,” the miner said in a statement on Tuesday.
In an article published on September 19, the Mail & Guardian alleged that, for “many” years, Lonmin’s South African mines had transferred so-called sales commissions to Western Metal Sales – a company it owned in Bermuda.
However, the publication claimed that Lonmin had failed to explain whether this company had ever had a physical office from which platinum was sold and marketed on Lonmin’s behalf, and from which these commissions could be accounted for.
“Whether or not substantial commercial activity occurred at Lonmin’s Caribbean subsidiary is not clear,” read the article.
Forslund was later cited in a report by the Mail & Guardian on September 20 as saying that the transfer of over R2.3-billion in fees from Lonmin to two of its subsidiaries should be investigated by the South African Revenue Service.
According to the economist, between 2008 and 2012, Lonmin transferred R1.2-billion in commission fees to Western Metals Sales, while a further R1.2-billion was paid in management fees to Lonmin Management Services.
“The amounts were shifted from Lonmin’s South African operations so that it would be kept away from financing wage demands, social labour commitments, or so that it wouldn’t be absorbed in taxable income,” the article quoted him as saying.
Lonmin has, however, rubbished Forslund’s claims, saying its financials had always been properly audited and the company had always met South African tax compliance requirements, including the structures referred to in the report.
“It is a matter of regret that the Mail & Guardian failed to reflect lengthy answers to detailed questions that Lonmin willingly responded to. The omission of these facts and context from the published story led to unsubstantiated allegations and suggestions, which results in an unbalanced and distorted article,” it stated.