Glencore to invest $1.1 billion in Zambia, kwacha gains

Glencore will invest over $1.1 billion in Zambia to sink three copper mine shafts with new technology that will extend mine life by over 25 years, pushing the kwacha to its highest in two months.

By 1040 GMT (6.40 a.m. ET) the currency of Africa’s number 2 copper producer had gained 1.3 percent to 11.1100 per dollar, its firmest level since Jan. 19.

“The news from Glencore obviously sent a positive signal but overall we are seeing a lot of dollar supply with very little demand,” analyst Maambo Hamaundu said.

Glencore plans to make the investments between now and 2018 and it was expected that Mopani Copper Mines (MCM) would be turned into a world-class mining operation by 2023, it said.

“We firmly believe that we shall be able to overcome the challenges that we face today as a company and become profitable and operationally efficient,” Mopani said in a statement.

Glencore was fully committed to Mopani and had invested over $3 billion in upgrading infrastructure and in major capital expansion programs since 2000, Mopani said.

An electricity shortage in the southern African country and weaker copper prices have put pressure on Zambia’s mining industry, threatening output, jobs and economic growth.

Source: Mining News Zambia

Keynote address by Dr. Pius C. Kasolo at the Zambia Mining Investment Forum, London

Keynote address by Dr. Pius C. Kasolo, Chief Executive Officer, ZCCM Investments Holdings Plc at the Zambia Mining Investment Forum, Piccadilly Hotel, London, on 21 March 2016

  • The Honorable Minister of Mines and Minerals Development in Zambia, Mr Christopher Yaluma
  • Your Excellency Ambassador Muyeba Chikonde, Zambia’s High Commissioner to the UK and North Irelend
  • Distinguished invited guests, ladies and gentlemen

Thank you for inviting ZCCM-IH to be part of this forum.

Let me start by saying that the previous year has not been good for the extractive sector, particularly mining. We witnessed low prices in the sector slumped by about 30% at the beginning of 2015, dropping to six-and-a-half year low.

However, we have already seen a slight change from trading about 4 thousand dollars per ton in November 2015, to a significant jump, trading at slightly above 5 thousand dollars at the beginning of March this year.

Despite this, ZCCM-IH has put in place steps to respond to the cyclical nature of the commodity prices.

As a Company, we are diversified in nature. But we want to build on this by having a multi-commodity approach as an important part of our resilience.

This approach, presents ZCCM-IH as an investment gateway not only into Zambia’s mining sector, but into other sectors as well, as I shall highlight in a while.

Allow me to give you a very brief background about ZCCM Investments Holdings plc.

We are a Zambian investments holdings company with a rich historical background.

ZCCM-IH stems from the then Zambia Consolidated Copper Mines limited, a copper mining conglomerate that was incorporated in 1982 but with roots going back to the early 20th Century that operated more than 10 mines.

Before I go into details, let me play a short clip about ZCCM investments holdings.

You notice from the video that ZCCM-IH is an Investment holding Company and not a mining company. Most people still call us “Zambia Consolidated Copper Mines limited”, and still think we are a mining company. However, this changed, as I have stated, in 2000 after privatization.

As a company, we retained minority shareholdings in the sold off mines at the time of privatization and started operations with a vision to be Zambia’s leading investments company and a mission to maximize shareholder value with due regard to the interests of all stakeholders.

The Government of the Republic of Zambia retained a significant shareholding in the new entity of about 87.5% at the time with the balance held by individuals and institutional investors spread around the world.

Mid last year 2015, Government launched the sale of some of its shares to the Zambian public. This was in accordance with the Lusaka Stock Exchange minimum free (public) float requirements of 25% of the shares.

As such, Government embarked on the sell down of its shares from 87.5% to 60.3% through the preferential secondary market offer.

The first sell down was done, successfully, as one of the leading pensions authority in Zambia bought about 15%. The second sell down specifically to the general public, was done late last year. GRZ still has 17.25% of the shares to sell down.

Currently government’s shares of about 17.25% and about 60.28% are being held by the Industrial development corporation (IDC) in Zambia.

Again if you saw, ZCCM-IH is listed on 3 stock Exchanges: a primary listing on the Lusaka Stock Exchange and also on the London Stock Exchange and the Euronext (Paris – Marche Libre).

On the LuSE, ZCCM-IH is the largest company by market capitalization.

Current Portfolio
ZCCM IH occupies a very unique and strategically advantageous position as an investments holding company, as it holds key minority interests across the mining industry in Zambia as shown in the video clip you just watched.

ZCCM-IH currently has a shareholding portfolio in 15 companies, including biggest mines such as Kansanshi mines plc, Mopani copper mines and Konkola copper mines.

Our shareholdings in these companies range from 10% to 100%. The commodities are diversified in nature, from copper, gold, cobalt, coal and energy, telecommunication, limestone, mining consultancy, financial services and gemstones.

Copper makes about 80 to 90% of these commodities.

Let me hasten to mention that, maximizing shareholder value underpins ZCCM IH operations.

As I have stated earlier, ZCCM Investments Holdings core assets lie in the mining sector, and this makes about 80% to 90% of our portfolio. For the past years ZCCM-IH has relied on dividend pay-outs largely from mining firms.

As we all know, the extractive industry is very cyclical in nature. As such, in order to move from being passive and just being a holding company, we have embarked on diversifying our investment portfolio by relentlessly and actively pursuing investment opportunities in other sectors such as real estate, agriculture, energy and manufacturing.

To start with, in AGRICULTURE, ZCCM-IH has about, 2 thousand Hectares of land in Lufwanyama with a water frontage on the Copperbelt Province, which has great potential for farming high yielding crops such as soyabeans, oilseeds or livestock (cows and pigs) and fisheries (aquaculture).

This farm land, is in an area which has a good rainfall pattern, and fertile soil. We are currently, seeking any financials or any strategic partnerships to come on board on this project.

Secondly, we have also gone into the PROPERTY MARKET. We have a number of properties, both residential and office, which are dotted on the Copperbelt Province and in Lusaka. We have decided to upgrade them, some of them to be sold off and others rented out.

Then in ENERGY, a number of projects in solar and hydro are on the cards for investment, and this is in effort to leverage on the power deficit the country and the region is experiencing. For example, ZCCM-IH with its partners have invested close to $850 million at Maamba Collieries Ltd, into a thermal power plant which will produce 300MW of power by this year 2016 and 600MW once completed.

Further, in our diversification agenda, as ZCCM IH, our aim is to optimize operations and add value to our subsidiary companies via investments and stringent monitoring of these investments. As such, ZCCM-IH has invested millions of dollars in its wholly owned subsidiary, Ndola Lime Company to restructure operations and improve efficiencies and the bottom line.

One of the planned investment projects through Ndola Lime Company Limited is the setting up of a cement plant, which will have a daily production capacity of 5000 tons per day. Related to this plan, is for the cement plant to generate energy for its operations and the surplus sold to the national grid.

Through these and other programmes, we will be able to deliver compelling long-term returns and maximise shareholder value.

I would like to state that the investment environment in Zambia is enabling in almost all aspects.

Zambia has had one of the world’s fastest growing economies for the past ten years, with real GDP growth averaging roughly 6.7% per annum, in spite of a drop in this growth in the previous year due to weaker global demand for commodities, lowered mining sector production, a poor farming season and electricity supply constraints, among others.

Despite the current global economic and domestic challenges Zambia remains well placed to weather the storm and maintain its progress with development objectives.

With substantial mineral wealth and untapped resources in agriculture, hydropower, and tourism, Zambia’s growth potential is very good.

For instance, ZAMBIA’s ranking in capacity to attract foreign direct investment in the region, on the continent and globally has tremendously increased in the recent past.

The World Bank released its ‘Ease of doing business’ report late last year which showed Zambia’s increased credit ranking from being 24 to number 19 out of a total of 189 countries which are monitored by the Bank.

In addition, Zambia is ranked 8th in Africa, 5th in SADC, and 4th in COMESA when it comes to rankings of the country’s conducive investment environment in as far as issues of doing business are concerned.

Further, when it comes to social and political stability, there is a lot of political will to ensure peace. Zambia is the only country in the region that has changed political leadership through peaceful transitions.

Let me reiterate, the Zambian political situation remains stable and infrastructure is improving as the economy further develops. Roads, railways, and airports are being vastly improved, particularly in areas of economic significance like the Copperbelt region. All of this growth in infrastructure can be attributed to Zambia’s growing economy.

Potential markets are not just limited to Zambia, however, but extends to the entire region due to its central geographical location through its participation in SADC and COMESA Trade Protocols. Both of these agreements offer preferential tariff arrangements and growing markets.

Coming back to ZCCM IH, we will continue to grow our portfolio beyond mining and will further increase our foothold in the energy sector, agriculture sector and real estate so that the company continues to maximize shareholder value.

The Company has identified value adding projects in these sectors and we are seeking strategic partners to bring these projects to fruition.

ZCCM IH remains confident about the fundamentals of the mining industry in general and those of copper in particular despite the low prices in the sector, which so far, have started going up as evidenced in the past two months.

But we must understand, that the cyclical nature of the commodities sector rewards those who are well positioned and we believe ZCCM-IH is uniquely well positioned, as a diversified principal stakeholder in Zambian mining, offering vast opportunities for investment.

So I invite you, to come and be part of the journey to success.

Thank you.

Chamber publishes a layman’s guide to understanding Mineral Royalty Tax (MRT)

In a bid to improve public understanding of mining taxation, and promote informed comment, the Chamber of Mines today released a report entitled “A guide to understanding Mineral Royalty Tax (MRT)”.

The short, 15-page report is available for download here>>> Guide to Mineral Royalty Tax (ZCM) – Medium Resolution (1)

Commenting on the release of the report, Chamber of Mines president Nathan Chishimba said: “We have recently commended the Government for annoucing the introduction of a sliding scale system for the determination of MRT rates, linked to the prevailing copper price. In order for the public to really appreciate the significance of this move, we believe the whole subject of mining taxation, and MRT in particular, needs to be better explained.

In recent years, MRT has been a hot topic. We wish to set out the cold facts, to give Zambians an understanding of a critical issue affecting the mining industry, and the wider context of taxation and investment in which the issue is situated.”

He added: “The publication of this report signals a more proactive approach by the industry in educating the public about important strategic issues. It is a natural follow-up to the media conference we held in December last year to explain the current crisis facing the global copper-mining sector. In the weeks and months ahead, there will be more such initiatives as the industry continues to engage constructively with stakeholders and the broader public.”

“A guide to understanding Mineral Royalty Tax (MRT)” has been designed to be accessible to a lay audience, and deals with the subject broadly rather than in complex detail. It covers the present situation in Zambia, explains the motivations and mechanics of MRT, and gives an outside view of our mining-tax system by the IMF and World Bank, and ends with some thoughts on the future of the mining industry.

Among the key learning points of the report are the following:

  • Unlike normal company tax, MRT is levied on revenues rather than profits; it is therefore payable even when mines are marginal or loss-making.
  • Mines can take several years to become profitable and pay profit-based tax, so MRT is an effective way for governments to get upfront short-term tax revenue;
  • MRT is used by many countries around the world, and always exists alongside a tax on profit – together, the two taxes assure a stable flow of tax revenue throughout the life cycle of a mine.
  • Unlike a profits-based tax, MRT is a cost to the business. A rate that is too high can therefore stifle economic activity and employment, discourage further investment, and thus diminish the long-term tax pipeline.
  • The report also considers Zambia’s approach to MRT in comparison with other mining jurisdictions.

Source: Zambian Mining Magazine

Governance, Risk and Compliance Column!

ear Colleagues,

I would like to introduce to you our first article on KCM’s commitment to a culture of compliance and governance. In this column, we will look at various aspects around this subject which are critical to the growth of thee business.

We have embarked on a programme of ‘Zero Tolerance to Non-Compliance and our participation in this undertaking is critical. The company is required to be fully compliant with all company policies, procedures, technical specifications, regulations, general guidelines and the country’s laws.

Every one of us need to exercise responsibility and accountability in discharging our roles and responsibilities to ensure the growth and success of KCM. Compliance is not a requirement for only senior management, it is everyone’s responsibility.

There is need to strengthen our internal control environment in KCM. Every single person has a role to play a as we seek to achieve the company objectives. Being compliant has to first be a personal resolution, and then a collective corporate way of doing business. I wish to encourage all of you to join hands in ensuring100 percent compliance to our rules, guidelines, regulations and legal obligations.

Good attributes to compliance start with being punctual on duty and good time management. It requires upholding safety standards, using company assets and resources in a prudent manner. It must then extend to softer issues of our value system of being ethical in our conduct. We need to exhibit integrity – a culture of honesty in both private and business lives. We need to embrace this as a value system and not just a norm.

Compliance and ethical conduct eventually builds integrity which then leads to a robust business culture. The growth of our society, families and the company cannot be detached from a strong value system, underpinned on compliance to statutory requirements and company procedures and policies.

In our next discussion, I will share with you a synopsis of KCM’s compliance programme which will focus on the realisation of a stronger business environment that guarantees the survival of this organisation. I urge you to be compliant!

Sharad Gargiya

Chief Financial Officer

KCM Employees a part of a global Chairman’s “virtual town hall”

HINGOLA, 6 March 2016, Anil Agarwal, the Chairman for Vedanta Resources addressed more than 300 Konkola Copper Mines (KCM) employees as a part of a global “virtual town hall meeting.”

The Vedanta founder and Chairman was speaking during a live broadcast through a video link to more than 300 KCM employees and about 5,000 in total from all Vedanta subsidiaries and businesses in 30 locations in 5 countries. Employees from all locations were able to ask questions to the Chairman, who was participating in London.

This was the first time that this technology has been used in KCM and enabled a wide cross section of the company to interact directly with the Chairman of the company’s largest shareholder.

The event was well received by KCM employees: According to Innocent Chiluba, a metallurgist in the company: “It was great to be able to hear the Chairman talk directly to us from London and answer the questions on our mind. I was amazed to see groups from so many different places on the screen.”

Mr Agarwal spoke about his affection for Zambia and Vedanta’s long term commitment to the country. He said Vedanta’s 50-year vision to continue mining in Zambia would be fulfilled, underpinned on the world-class and high grade ore body at the flagship Konkola mine in Chililabombwe.

Mr Agarwal told the employees that,

our main intention at the moment is to survive the current challenges. It is all about our determination to take our company forward. You need to work hard, cut costs and increase production. We have to be innovative.

Mr Agarwal said Vedanta subsidiaries, including KCM, would continue to nurture young people into positions of leadership. The company would also promote the ascendancy of women into leadership positions as it seeks to expand its asset portfolio as a diversified global resources company.

I encourage all of you to remain ambitious for success, humble and hardworking. To find and recognise talent is the most important thing for us. Our success will be based on trust and honesty. I have seen a great passion from our employees at KCM and there is also great potential. We have done everything possible to develop this asset by investing over $3 billion on processing plants and the mines,

Mr Agarwal said, addressing KCM.

Vedanta Chief Executive Officer Tom Albanese, who is also KCM’s Chairman, reiterated that a strong foundation had been created at KCM.

“There is so much enthusiasm about copper mining in Zambia. Everyone is passionate about the KCM 50-year vision,” Mr Albanese said.

Mr Albanese said that companies which emerge strong from the downturn in mining are those that inevitably benefit most from the return to higher commodity prices.
“This is not the first time we have faced these challenges. I am optimistic we will come out stronger,” he added.

Chibuluma Mines saves 42 jobs

CHIBULUMA Mines Plc has rescinded its decision to lay off 42 employees under its restructuring programme aimed at saving the company from collapse.

Board chairperson Jackson Sikamo said in a statement yesterday that the mine has embarked on operational restructuring aimed at ensuring survival of the company and job security for miners.

Mr Sikamo said the decision to save 42 jobs was reached after negotiations with Government and the Mineworkers Union of Zambia (MUZ).

“As a consequence of the restructuring, 300 jobs were initially planned to be lost; however, through dialogue with the Government and the worker’s representatives, this number reduced to 258 employees.

“The first phase of the restructuring process saw 127 employees declared redundant in January 2016 with plans of releasing the remaining 131 by the end of February 2016.

“After further review and continued dialogue with all stakeholders, the company established that it would be more cost-effective to reduce production levels, streamline operations and continue to run its operations without outsourcing,” Mr Sikamo said.

He said the company would continue executing additional cost-cutting measures to ensure the business remains viable.

“We would like to take this opportunity to thank all employees for the discipline exhibited during this challenging period; the union for the support and maturity in dealing with the issues as they arose, and the Government for the guidance provided throughout the process,” Mr Sikamo said.

He said the company has been facing operational challenges that made it difficult for it to sustain the entire workforce.

Source: Daily mail

Investrust Plc Extract from 2016 Annual Report

Investrust Bank Plc (Investrust) recorded a 19% decrease in net interest income to K39.77 million during the year ended 31st December 2015 (2014: K49.30 million). This was driven by the increase in interest rates in fixed term deposits and inter-bank lending. During the year under review, the bank did not expand the physical branch network. Rather, the bank focused on consolidating operations in its branch networks.

In 2015, Investrust embarked on a capital raising exercise through a Claw back Rights Offer to meet the minimum capital requirement set by Bank of Zambia. ZCCM-IH fully underwrote the offer and the results, subsequent to year end, indicated that ZCCM-IH ended up with 48% of the shareholding in the bank

ZCCM-IH made an application for waiver of a mandatory offer to the SEC and the SEC approved the application on condition that ZCCM-IH sold down its shareholding to below 35% which is the trigger for a mandatory offer. ZCCM-IH has since sold 3.2% of its shares in the bank and is currently at 45.4% shareholding.

The bank’s share price on the LuSE closed the period under review at K13.50 (2014: K13.50).

There were no dividends declared during the financial year ended 31st March 2016 (2015: Nil).


METS Extract from 2016 Annual Report

Misenge Environmental and Technical Services Limited (METS) earned a total of K6.22 million as revenue for the year ended 31st March 2016 (2015: K6.23 million). METS recorded a loss after tax of K2.9 million (2015: K0.6 million).

METS was awarded a contract as a project management consultant firm during the nine month preparatory stage of the Zambian Mining Environmental Remediation and Improvement Project (ZMERIP). ZMERIP is a World Bank led project whose “objective is to reduce environmental health risks to the local population associated with the mining sector in critically polluted areas in Kabwe and Copperbelt provinces through improved capacity of the key institutions”. This is expected to improve METS’s income base going forward.

There were no dividends declared during the year under review (2015: nil).


Maamba Colliers LTD Extract from 2016 Annual Report

Maamba Collieries Limited (MCL) reported total revenue of K121.9 million (US$12.3 million) for the year ended 31st March 2016 (2015: K94.5 million (US$14.6 million) and had profit after tax of K52.9 million (US$5.4 million) (2015: Loss K503 million (US$0.069 million)). The company’s current assets exceeded its liabilities by K1, 180 million (US$105.6 million) as at 31st March 2016 (2015: US$103.7 million). Additionally, the company has accumulated losses amounting to K999.5 million (US$89.4 million) (2015: K1, 136.4 million (US$95.2 million).

MCL’s 300-megawatt fully integrated coal-fired power plant reached Financial Closure on 28th July 2015. The peak funding of the project was capped at US$843 million and funded on a debt/equity ratio of 70:30. ZCCM-IH and Nava Bharat (Singapore) Pte Limited (Nava Bharat) have contributed US$253 million toward the project, and US$590 million is debt in form of long term loans from Development Financial Institutions and Commercial Banks.

The power plant is the first private power project in the Sub-Saharan region to receive Export Credit Agency insurance cover from China Export and Credit Insurance Corporation (Sinosure).

MCL signed a 20-year power purchase agreement to supply 100% of the power plant’s output to ZESCO.

In May 2015, ZCCM-IH issued a letter of credit (LC) of US$8.75 million, through Standard Chartered Bank Zambia as a contingent equity support for the thermal power plant at Maamba. In support of the LC, the funds were placed as a fixed term deposit at a Kwacha interest rate of 14% and fixed exchange rate of K7.385/US$.

Subsequent to year-end, the first 150 MW was commissioned on 7th August 2016 and the next 150 MW was commissioned in November 2016 where after Nava Bharat will be responsible for the operation and maintenance of the power plant.

There were no dividends declared during the year under review (2015: nil).