Interview with Matt Pascall, First Quantum Minerals, Director Operations, on updates from Kansanshi and some of the current challenges of operating from Zambia.

Matt Pascal,FQM, Director Operations

Matt Pascal,First Quantum Minerals, Director Operations

Following the decline in the price of copper, what strategies is First Quantum employing at Kansanshi to ensure profitability?

First Quantum has to remain efficient at Kansanshi. Currently, Kansanshi operates in the lower 40-50 cost percentile. This means that, should the price of copper drop, most of the copper operations worldwide would start feeling severe pressure before Kansanshi does.Continue Reading

Interview with Deon Heyns, Managing Director, Barloworld Equipment Zambia on the importance of involving local communities around mining projects and the company’s overall assessment of working in Zambia.

Deon Heyns

Deon Heins – Barloworld Equipment

“Following early indications of a slowdown in the mining cycle in the final months of 2013, 2014 has confirmed the downward trend on the back of slower growth in China… However, the long-term fundamentals for Zambia remain good and we remain positive on the country’s future outlook.”

“The Barloworld Equipment theme on community development initiatives in Zambia in 2014 is “Let’s grow together”

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Interview with Gordon Backuisen, Territory Manager Sub Saharan Africa, Boart Longyear on developments at Kibali and Tenke Fungurume mine and the advantages of sonic drilling in the Copperbelt.

Boart Longyear

“To be successful in a country like the DRC drilling contractors need to be versatile, flexible and able to offer complete services”

“In the Copperbelt Sonic Drilling is appropriate as for both the Zambian and the DRC sides of the belt, the top 80 m. ground layer is badly fractured, with caves and mudflows, making any technique for drilling complicated.”Continue Reading

Interview with Ivan Muir, Managing Director, SGS Inspection Services Ltd on the challenges of operating from the Copperbelt and SGS’s visions in the region.

Ivan Muir, SGS Inspection Services

Ivan Muir, SGS Inspection Services

“Our facility in Zambia is equipped with the same standard quality control procedures that exist throughout our network of over 110 laboratories.”

“Being independent is important, as it entails having no affiliations with mining companies, commodity buyers or sellers or government entities that could be construed to affect our independence or impartiality.”

SGS provides inspection, verification, testing and certification services. Could you provide us with an overview of the company in Zambia?
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Mining in Zambia – The Country of the future in the Sub-Saharan African region?

Far – reaching

The Republic of Zambia (Zambia), is a landlocked country in Southern Africa that shares borders with eight neighbours: Zimbabwe, to the south, Tanzania to the north-east, Namibia to the south-west, Botswana to the south, Angola to the west, Malawi to the east and the Democratic Republic of Congo (DRC) to the north-west. The country’s mining history spans over ninety years with a peak in the late 1960’s, when Zambia was the world’s third largest copper producer, after the USA and the former Soviet Union. Mining in Zambia has always been central to the Zambian economy and continues to play a key role in the social and economic development of the country. Predominantly a copper mining country, Zambia is currently the second largest copper producer in Africa after the DRC and the eight largest globally according to the US Geological Survey. Copper production had reached its peak of 700,000 metric tonnes per year (mt/y) in 1972 but subsequent falling copper prices and mismanagement during the period of nationalisation caused annual production to drop to 200,000 mt/y in the late 1990’s. Since the early 2000’s, following completion of the privatisation process and increased demand for metals from China, copper production recovered sharply reaching 765,073 mt in 2013 according to the Minister of Mines with a projection to reach 1,000,000 mt by the year 2017, on account of new mining projects that are currently under development. If this figure is attained, the mining industry’s contribution to GDP will increase to approximately 20% in the medium term to US$1.35 billion and Zambia will rank among the worlds top five copper producers by 2017 alongside Chile, China, Peru and the USA. Cumulative new investments in the mining industry in Zambia have been in excess of US$10 billion since the year 2000, creating 74,000 jobs by the year 2012, up from 27,000 jobs in the year 2000. Indeed, it is projected that investments in the mining industry in Zambia will reach approximately US$15 billion by 2017 on account of the new projects under implementation if international metal prices hold above the current levels recorded. According to the World Bank’s Doing Business indicators, Zambia’s business environment – although middling from a global perspective – is among the best in Africa with only South Africa and Botswana doing better in the Southern Africa region. Moreover, Zambia is 47th worldwide in terms of overall progress since 2005 with the country benefiting greatly from political stability and a conflict-free setting.

Mining History

There are three distinct periods in the history of the mining industry in Zambia. The industry was under private ownership during the colonial era, was nationalised after independence and then privatised during the wave of liberalisation in the 1990’s. During the nationalisation process, Zambia was the country of Kenneth Kaunda, a politician who was elected as first President of Zambia. Kaunda adopted an ideology of African socialism, close to that of Julius Nyrere in Tanzania. The country’s economic policies focused on central planning and nationalisation and in 1969, Zambia’s copper mines, which at the time were producing 700,000 mt/y and were contributing over 50% in government revenue, were nationalised. The steep drop in productivity that followed, due to mismanagement and the collapse of the copper prices in the 1970’s, led to the country’s steady economic decline. In a recent study, Eunomix, a London based consultancy that specialises in de-risking mining and resource projects in Africa, calculated that Zambia lost US$45 billion in mining rents through nationalising its mines, an amount considerably greater than the foreign aid it was receiving in those years. Indeed, it is estimated, that Zambia would have generated mineral rents totalling US$65 billion had it continued to produce at a rate of 700,000 mt/y over a 40-year period, between 1970 and 2010, and instead it eked out only US$15 billion. The period that followed nationalisation, starting in 1990, is recent history. Zambia held its first multi-party election and with Frederick Chiluba elected as Zambia’s second President, economic and political liberalisation commenced. The liberalisation of the economy and privatisation of the Zambia Consolidated Copper mines (ZCCM) started to draw much needed foreign direct investment and was the lifeline that saved the Zambian economy from total collapse brining the country in a new era: from an economy 80% controlled by the state to one where the state now controls between 10% and 15% of economic activities.

Investment Climate

Since the privatisation of ZCCM, Zambia has welcomed foreign investors and is today recognised as one of the most open African economies to foreign equity ownership. An ambitious reform agenda was launched in 2004 under the Private Sector Development Programme to improve the investment climate and boost the private sector contribution to economic growth. Moreover, the government has articulated the country’s long-term development objectives in the Sixth National Development Plan (SNDP) and the National Long Term Vision 2030. ZCCM-Investment Holdings Plc (ZCCM-IH) is now listed in London, on Paris Euronext and on the Lusaka Stock Exchange with 12.6% of the shares owned by foreign investors and 87.4% held by the government of Zambia. ZCCM-IH, however, still holds minority interests in most of the mines in Zambia including Vedanta Resources Konkola copper mine, First Quantum’s Kansanshi and Glencore’s Mopani effectively working as an entity holding the government’s minority interest in the privatised mining industry. Investments in Zambia are currently regulated by the Zambian Development Agency Act No. 11 of 2006. The Zambia Development Agency offers a range of incentives for companies in the form of tax incentives, exemptions and concessions for mining companies with business registration and licensing taking, on average, 17 days. Since privatisation there has been no undue government interference in the mining sector and Zambia has become a preferred investment destination for mining projects, attracting an influx of investors which has resulted in increased mineral exploration and mining activities. However, the Zambian government’s recent decision to review taxes and withhold VAT repayments has re-ignited concerns in the sector. The rationale is driven by the Government claims that, despite the boom and revision of monetary policies, US$2 billion continues to be lost annually to, primarily, aggressive tax planning by mining companies. Companies have repeatedly raised concerns that ever more onerous requirements are preventing them from making meaningful returns on their investment and anecdotal evidence is that investors are reviewing all projects worth more than US$1 billion as a result of this uncertainty over the future fiscal regime.

The country of the future in the Sub Saharan African Region?

With only 58% of the country geologically mapped, there is considerable potential for further discoveries in Zambia. Yet to live up to its potential and global expectations the country will need to address a number of challenges. Concerns remain, in particular, over the sector’s dependency on imported foreign products, the volatility of the country’s fiscal regime and the aged and inadequate infrastructure in the road, rail and power sectors.

This article will appear in Market Monitor’s Mining in the Copperbelt Report, the Copperbelt Outlook Series of 2014/2015. To participate in this report please contact us on info@mktmonitor.com

Government revenue from the mining sector in Zambia-past trends and future prospects

In a new vein- Zambia

The Mineral Development Policy (MDRP) of 2013 was dictated by a number of important developments that have taken place since 1995 when the Government last reviewed and articulated its policy direction for the mining sector. The most significant development was the transfer of ownership of the mining industry to the private sector following completion of the privatisation of the mining industry in March 2000.Continue Reading