Find us on Google+

Monday, 21 May 2007

Lumwana Mine video presentation


Equinox Minerals have released a new video presentation of the Lumwana Mine - Flash or Windows Media.

6 comments:

  1. Cho,
    Thanks for the video link, the graphics really help to understand the scale of such mining concessions. It also sparked my curiousity and sent me hunting around the Equinox site for more info. In perusing the April 30th announcement http://equinoxminerals.com/files/document/279_Apr_30,_07_Lumwana_Mining_Commences.pdf on commencement of operations at Lumwana, I was struck by the prominent placement of this line: "NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S." Any ideas as to why?

    I also noted that while "the Company is focused on the development of its 100% owned Lumwana Project in Zambia", other news articles indicate that the project is not fully capitalised http://equinoxminerals.com/files/document/207_Equinox_revises_Lumwana_figures_(Northern_Miner)__-_14-07-2006.pdf and many current shareholders are skittish over concerns of stock dilution if the company is forced to issue shares to cover upwardly revised development costs. The same article indicates that:

    "The company says the infill drilling program, redesign of the Lumwana pits and a copper price of US$1.20 per lb. resulted in the 28% increase in reserves for Malundwe and the 70% increase for Chimiwungo — which in turn, boosted the estimated mine life to 37 years from 18 years."

    I can't help but wonder, in part due to having listened to MrK over the last month, if these new revelations do not constitute reason to re-evaluate the terms of this concession. If Equinox needs more capital, intends to run the mine for twice as long, and hopes to extract significant quantities of uranium from the site as well, then perhaps it would behoove the GRZ to enter into this deal as an investment partner and not just a bystander. Even given that such an investment would almost certainly require increased government sector borrowing, presumably the repayment rate and eventual profits/benefits would be at the private sector level hitherto unreachable through mere taxation and tariff measures.

    While the prospect of renewed public sector endebtedness so soon after reaching the current state of solvency the state has achieved does give me pause, I feel it will not hurt to explore the long term potential of actually investing in the exploitation of Zambia's largest export, and claiming the same benefits as the Australian and Canadian investors. The alternative appears to be hovering beneath the table wondering how large a share of the scraps can be snatched without upsetting the diners.

    I feel I must be missing something obvious in all this, so please anyone, honestly, set me straight on where I have strayed from the reality. Thanks!

    ReplyDelete
  2. ”the graphics really help to understand the scale of such mining concessions” .


    The lack of audio streaming is somewhat unfortunate but, indeed it is not difficult to appreciate that it is a vast development! I mean we are talking about what is mean to be the largest mine in Africa after all.

    The other thing missing from there were numbers. I would have loved to have seen the detail of their infrastructure proposals e.g. how many houses they would build in the central business district – what type of houses? The road and rail links – what is the detail of those proposals etc. I know for example that Zambia’s construction industry is experiencing unprecedented growth (always a good sign of an economy driving forward), with North Western province leading the way. Knowing how much Equinox are contributing to that drive would have been interesting. I am just reading my nephew and his friend’s business proposal on setting up “a brick making plant” in Solwezi. Apparently the demand for construction is stratospheric.


    ”NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.” Any ideas as to why?

    Possibly stock market issues. I suspect US regulations have put in place strict procedures on how you announce market related information.


    "The company says the infill drilling program, redesign of the Lumwana pits and a copper price of US$1.20 per lb. resulted in the 28% increase in reserves for Malundwe and the 70% increase for Chimiwungo — which in turn, boosted the estimated mine life to 37 years from 18 years."

    An interesting read.
    Thanks for sharing the article.


    ”I can't help but wonder, in part due to having listened to MrK over the last month, if these new revelations do not constitute reason to re-evaluate the terms of this concession.”

    I think you have a point (as does MrK).
    The problem I think is one of asymmetric information.
    The mining company will always know more about the future prospects of the mine than Government.
    They’ll know more about is near true potential, its marketability etc.
    It comes down to resources – if Government knew the value of the mine it would have done so through undertaking its own deep geological analysis. This ultimately costs money and expertise.

    The other reason is that of learning by experience. The more Equinox mines in the area, the greater things they’ll discover. As they have spent more time for example the “geophysics” has told them that is uranium near by and so forth. Also they’ll find no just copper there, but other precious stones in quantities difficult to full predict before hand.

    I am sure there’s a whole body of literature on this.
    Its ultimately asymmetric information.

    Is the solution partnering the mines? Possibly if we are a bit more intelligent in selecting which ones we enter. We must not seek to partner every mining company doing business companies. As you say larger operation like Lumwana probably deserves the partnership approach. However, on what basis do you enter such partnership? What if the mining company overestimated the mining prospects?

    It is possible that the best approach could be to spend hard cash at doing our own surveys. I was particularly struck that the drilling that is being done in North West province to scope out the scale of the “oil” is led by private companies. The best model is that Government should spend more money at developing the in-house teams and then it can have full knowledge of the minerals we have and where.

    ReplyDelete
  3. Fitty_Ngwee-0111 June 2007 at 00:59

    Chol,

    I think you thoroughly discussed the issue on the blog and yet again you snatched a lot of points from my brain. I particularly liked the conclusion:

    "It is possible that the best approach could be to spend hard cash at doing our own surveys. I was particularly struck that the drilling that is being done in North West province to scope out the scale of the “oil” is led by private companies. The best model is that Government should spend more money at developing the in-house teams and then it can have full knowledge of the minerals we have and where."

    In many cases, selling mineral rights is as literal as that sounds. If the buyer finds more uses for what was initially considered waste or discovers other bye-products in his mining and processing business, that would have to be his/her 'free' cash. In many cases, the new mine owner would have to invest a lot of resources not only to fully understand the bye-product or the 'former waste' but also getting a market for it and building up more infrastructure to handle it. It is my understanding that 'new discoveries' in the ore body should never be terms for renegotiating the contract. It is my understanding that the ministry of mines has all the right professionals; geologists, engineers, economists and lawyers who look critically at all data and make appropriate recommendations. So, when the appropriate legal professional appends his signature to some mining agreement, it is after the fact that the geologist has agreed that there may also be uranium in the vicinity and the total reserve has probably been underestimated by a minimum of 10%. I just can't see what circumstance would have to be grounds for redoing the contract. Any reason to redo the contract must be clearly stipulated in the contract itself, else it is being breached.

    ReplyDelete
  4. "I just can't see what circumstance would have to be grounds for redoing the contract". - Fitty

    Indeed.
    I don't think the Government can do any more once they have signed a contract. From the little that I have read on this subject and exchanged with MrK, it seems that the contracts are quite comprehensive. http://www.minewatchzambia.com is the place to find more information. It contains lots of information agreements etc.

    Now there are two potential exceptions to this I think - they all involve new legislation.

    1. Introducing a new fiscal instrument like a windfall tax - I don't think the contracts would forbid that. Unless we are too stupid to have signed such a contract. Government should never sign contracts that stops it from acting as Government towards those companies. It should be able to still have control over imposing new taxes of any sort e.g windfall taxes.

    2. Another idea I have is a reform to the current Zambia town and country planning act - with greater powers to the local authority to allow them to block new developments or expansions that don't come with additional infractrusture. My idea is based on Section 106 of the UK Country and Town Planning Act GDPO 1995. Have a read of this blog to get my idea:

    http://zambian-economist.blogspot.com/2007/03/your-excellency-its-broader-than-energy.html

    Let me know your thoughts :)

    ReplyDelete
  5. Cho,

    Government should never sign contracts that stops it from acting as Government towards those companies.

    Isn't that what the constitution is for?

    And how much is just misinformation from ministers who have ulterior interests and motives?

    ReplyDelete
  6. MrK,

    How do you decide what should be in the constitution and what should be in other policy documents like White Papers that can change from time to time?

    ReplyDelete

All contributors should follow the basic principles of a productive dialogue: communicate their perspective, ask, comment, respond,and share information and knowledge, but do all this with a positive approach.

This is a friendly website. However, if you feel compelled to comment 'anonymously', you are strongly encouraged to state your location / adopt a unique nick name so that other commentators/readers do not confuse your comments with other individuals also commenting anonymously.