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Thursday, 19 July 2007

What the mining companies pay.....KCM snapshot

Only 2% of KCM's mining taxes are local - assuming all of it goes to the local people (?). An extremely low percentage figure.

Update:
The source for the numbers above can be found
here.

Update 2:
To add more information to the proceedings - the summary table below from For Whom The Windfalls Report 2007 (Appendix 1):


9 comments:

  1. Are these numbers current or projected? Are we to assume that the $80M figure will be the return from 2010 and beyond, when KCM is producing 500k tonnes of copper per year? That comes to just $160 per tonne, and @2% gives a paltry share of just over $3 per tonne to local taxation. Even if the numbers are only for this year's production levels (presumably lower), the Zambian share per tonne still looks pretty meagre.

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  2. These are current numbers.

    I believe $80m is the estimated figure for 2007, with $75m being the 2006 contribution.

    See the "update" to the post showing the link to the presentation in London containing the numbers and other information.

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  3. Thanks for the update!

    The document indicates 200k tonnes of copper extracted this year, so taxes add up to $400 per tonne, $8 of which goes to local rates. In KCM's favour however, their employee health and education initiatives do have some fairly impressive results, such as the reduction of malaria incidence amongst employees from 1200 cases in 1999 to zero in 2006. Perhaps they can now be persuaded to extend this successful programme to non-employees in the area as a further demonstration of good will. I also notice that they provide parent company stock options to managers, but only production incentives to workers, pity.

    Apparently the parent company, Vedanta Resources, in addition to the $680M pair of Zambian expansion projects at Konkola and Nchanga, is set to spend $1.9B on outfitting Indian mines with integrated power generation facilities, including a 540mw facility at their Balco aluminum project. Given the rapid erosion of Zambia's electric export margin in recent years, perhaps similar investments in generation infrastructure could be made in the Copperbelt. Excess capacity could also be routed north to profitably supply new mining efforts on the Congolese side of the border. Zambia has been able to benefit from the advantages of excess generation from hydropower, not least of which is the predictability of supply for industry, but if present trends continue the nation will soon require imports, tighter supplies, and higher rates. That will severely hamper any efforts towards rural electrification as well.

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  4. This represents only 9K tonnes of copper at todays prices and for a company that mines 200K tonnes a year.The Zambian on the ground pays 30% on all income and Companies pay 35% on all profits so do the maths we are being ripped off.

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  5. Yakima,

    A useful link on Investment Opportunities in the Zambia Power Market. Has very useful information and graphs. Worth checking it out. Incidentally useful presentation on farming and othe areas can also be accessed here.

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  6. The Zesco presentation is quite informative, it appears that with new mining operations set to increase demand by some 450Mw next year, and no new generation facilities due to come online prior to 2011, the next few years may be plagued by power shortages and/or price increases. Available transmission infrastructure limits import directions to two, via the DRC or via Zimbabwe, with connections to Namibia, Botswana, Tanzania and Malawi portions of the high voltage grid (220kV and above) still incomplete or only in the planning stages. The DRC is connected to the rest of the grid only through Zambia, and I doubt that they have excess capacity sufficient to make up the shortfall on their own. That leaves high voltage importation via Zimbabwe, and we all know what a mess their transmission grid has been of late. Not a pretty picture for the Zambian economy, at least over the near term.

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  7. A very accurate summary!
    It appears we are victims of our own success. There's no doubt any new significant mining developments in the regions must consider power generation. I cannot see any major expansions after Lumwana.

    I am looking at Northern Province and Luapula with Kalungwish River, Mambilima and Musonda Falls. The potential for Hydro is enormous. Incidentally these are the same areas need vast mineral expansion. The potential there is infinite.

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  8. And right on cue......Musonda falls needs K24b

    Musonda falls needs K24b
    Government is looking for K24 billion to buy a new hydro-power equipment at Musonda falls Power station.

    Energy Deputy Minister, Gaston Sichilima told Parliament that immediately funds are available, rehabilitation of the power station which was constructed in the 1950s will start.

    He said government is committed to ensure that the power station which has the ability to produce a total of 500 mega watts is fully operational.

    Mr. Sichilima was responding to a question from Bahati Patriotic Front (PF) Member of Parliament Besa Chimbaka who wanted to know when the hydro-power equipment at Musonda falls power stations will be replaced.


    Expanding Musonda would be good..which leaves the other two undeveloped sites with massive potential....

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  9. The Post Newspaper yesterday carried the following story:

    KCM records $301m net profits

    KONKOLA Copper Mines (KCM) has recorded net profits of US $301 million for the financial year ended March 31, 2007.

    This signifies an increase from last year’s US $114 million due to high copper prices.
    KCM also paid an inaugural interim dividend of US $5.7 million, of which Zambia Copper Investments (ZCI) received US $1.6 million in November last year.

    ZCI announced that KCM would soon confirm the declaration of a final dividend in the same amount.
    And KCM communications advisor Sam Equamo has expressed optimism that the mining company would double copper production to 500,000 metric tonnes in 2010 from the projected 200,000 metric tonnes this year.

    “KCM expects to produce 500,000 metric tonnes of finished copper per year when its key projects, the Konkola Deep Mining Project, the Nkana Smelter Project and the Chingola Refractory Project are fully operational by 2010,” Equamo stated.

    Meanwhile, ZCI has managed to more than double its net profits from US $38.5 million last year to US $ 85.4 million this year.
    ZCI stated in a note to shareholders that although production at KCM, in which the company holds 28.4 per cent shares, remained below the targeted levels, high profits were achieved due to a soar in copper prices.

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