An industry perspective on recent mining developments. Naturally, a lot of praise for Zambia's low fiscal regime, but also an "insider" hint (?) about a potential new Mining Act. Not sure whether that is intended to a pre-election give away or a post-election reward (as was case in 2008 with the abolition of the windfall tax) :
All jurisdictions have their issues and difficulties that mining companies need to take into account when making their investments. In general, it has become a bit harder to do business as a mining company in many parts of the world. That means those jurisdictions which do provide a reasonably friendly mining policy and regulatory environment give themselves a great advantage over other places where narrower interests hold sway.
It seems Zambia is heading in the right direction, and is giving itself a very good chance to sustain itself as one of the world’s major producers of copper. Zambia’s chamber of mines general manager Frederick Bantubonse recently told my colleague Lionel Williams, who has done the series of articles in this edition featuring that country and mining companies operating there, the signs are good that the Zambian government is about to implement an investor friendly Mining Act. This will open the door to further foreign investment that has been sitting on the fence watching potential outcomes.
Copper is a good place to be at the moment and Zambia is Africa’s largest copper producer. It produced 730,000 tonnes of the metal in 2010, a large increase over the 656,000 tonnes of 2009. And there are big investments in the pipeline and coming on stream. These should see Zambia producing more than a million tonnes of copper a year within a few years and increasing output further beyond that.
Vedanta’s long evolving Konkola Deep project is one of the drivers of the expansion. Konkola Deep, by accessing the rich orebody that lies beneath the area of current operations, will more than double copper production from under 200,000 to 500,000 tonnes a year within three to five years.
Zambia is also the site of one of China’s flagship mining ventures in Africa, this being Non-Ferrous China Africa, and that group is increasing production following large investment. There is Vale of Brazil’s presence in the country with its 50:50 joint venture with African Rainbow Minerals of South Africa. Their Konkola North project will be commissioned in 2012 with production ramping up to 45,000 tonnes a year and then increasing to 100,000 a year as a second module is put into place.
Also illustrative is the comparison Canadian based First Quantum Minerals must be making, the company having had its assets in the Democratic Republic of the Congo just across the border seized after investing US$1.1 billion in that country.
In comparison, the company’s Kansanshi mine in Zambia, which already produces 240,000 tonnes a year of copper is planned to expand to 280,000 tonnes a year over the next three years. In addition to established and planned projects, Zambia is still showing great exploration potential. The Japanese International Co-operation Agency (JICA) is involved in an exploration programme for the 45% of Zambia that has not been explored, and this initiative is making progress.
An exploration company such as Mukuba Resources is applying new technology to uncover mineralisation and generate new copper targets some 110 km southwest of Ndola. There has not been a new discovery on the Copperbelt for some time, with past discoveries made by targeting mineralised outcrops. Undoubtedly there are more major copper and other mineral deposits to be discovered in that country.
What also helps Zambia gain advantage over its competitors for mining investment is that it has an effective grid power network serving its mines on the Copperbelt. Like other parts of the world there have been problems with power shortages and outages but a strategy is in place to ensure medium and long term power supply security.
It helps too that Zambia has a long history in the mining sector. It experimented disastrously with nationalisation in the past and learned hard lessons. When the boom before the recent global economic crisis led to political opportunism and disastrous policy being implemented, even then a lot of people in the system there knew this was a very bad idea. Subsequently the Zambians have demonstrably listened to reason, and rapidly reversed what would have been unmitigated disaster for a country that bases a large part of its economy on mining.
Unscrupulous fools exist everywhere, definitely in the political process, some of them arrogant, cunning and ruthless, and very willing to sacrifice everything and everybody on their own toxic alters. Zambia seems to be proving that approach need not prevail everywhere and all the time, and seems to be making decisions that should benefit everybody, not just mining companies let it be pointed out. Without doubt, mistakes were made in the recent past of that country’s mining sector, but prudence and common sense seem to be winning out now.
It suggests that if Zambia continues along this track, increasingly it will be bracketed with countries such as Chile rather than with its neighbours Zimbabwe and the DRC.