KONKOLA Copper Mine Plc has written to its workers at Nchanga, informing them that the Chingola-based underground mine will be put on care and maintenance with immediate effect.

According to a letter addressed to the employees, KCM stated as follows: “This information must be communicated to all staff by Friday 31st July 2015. This includes: all KCM employees and contractors. KCM Plc has been informed by Copperbelt Energy Corporation (CEC) that electricity power supply will be reduced by up to 30 per cent. As a result of the power reduction, KCM has decided as follows: To place Nchanga underground operations on care and maintenance, scale down on the Nkana refinery operations. The above measures are with immediate effect until further notice,” read the notice letter in part.

And Kitwe-based Anglican priest Fr Richard Luonde said his friends who work at Nchanga mine had called him to complain about KCM’s decision.

“I have this letter here, someone just called me and said, ‘Ba Father Luonde, please help us advise this government. Very shortly, there will be mayhem in Nchanga. Bytomorrow morning, it will be disaster’,” Fr Luonde said.

“What this means is that when they put this on maintenance, there are close to 3,000 workers at Nchanga underground who will be declared redundant. People will lose jobs and their families will suffer.”

He said it was clear that KCM was using power cuts as reason to shut down its operations at Nchanga when it has always been wanting to reduce its workforce.

“This KCM has always been wanting to reduce its labour force and they are now using the Zesco load-shedding to get rid of workers. But when they get rid of these 3,000 employees, they will be getting rid of over 20,000 people because these workers have families,” said Fr Luonde.

And sources within senior KCM management revealed that Vedanta Resources, the owners of the mine, had refused to invest in the Nchanga underground mine and management had no option but to close.

“We are folding, yes… we saw this coming because the owners of KCM, Anil Argawal and his friends, have refused to invest in underground operations at Nchanga. We told them at several internal meeting that this is a terrible mistake but they are not ready to do that,’’ sources said.

“The technical aspect of this issue is that Nchanga underground is an old mine as you know; it’s very deep now, and in mining, the deeper you go, the more costly mining becomes. But this is a manageable situation by the investor because we still have a rich copper ore body underground. This issue of saying it’s because of power cuts is just an excuse they want to put up.”

The sources said news of the mine shutting down operations had created serious apprehension among workers and the labour movement.

“As we speak, the president of the Zambia Congress of Trade Unions Nkole Chishimba is on his way to KCM. Other union officials are here and they have told us in our faces that they will not accept this; they have challenged KCM and the government, which has a stake in KCM, to invest in the mine and maintain these jobs,” the source said.

Mineworkers Union of Zambia general secretary Joseph Chewe said the union would issue a statement after receiving official communication.

“We have received those reports but we are waiting for official communication. We are making frantic efforts to get the details as we speak. We will give you details later together with our position on this matter,” said Chewe.

And National Union of Miners and Allied Workers general secretary Steven Mukupa said the union had also gotten the report and it would be unfortunate if KCM decided to take a drastic measure without involving stakeholders.

“I am just waiting for an email over this but we have heard the reports. What we want is official communication. They (KCM) should have alerted us, this is a serious matter. It is extremely unfortunate if that’s what they have done. We will give you our comprehensive statement later,” said Mukupa.

KONKOLA Copper Mines has started importing copper concentrate from Chile which contains arsenic, a toxic chemical element that causes cancer if exposed to humans in uncontrolled quantities.

But the mining company says it has taken the necessary precautions to ensure that “this and all impurities are captured and safely stored so that there is no adverse impact on the environment or human health.”

According to studies, concentrated arsenic content can contaminate groundwater, leading to widespread epidemics and if exposed in larger quantities to humans, the brittle steel-grey semi-metal can cause arsenic cancer.

Technical sources at KCM also feared that the copper concentrate the company was importing from South America could be harmful to humans and the environment.

The sources said the workers who are handling the copper concentrate feared for their health as the consignment from Chile had levels of arsenic as high as four per cent.

“If you recall from your chemistry, arsenic is not like any other ordinary chemical friendly to the environment and human beings. Arsine gas is highly toxic. The toxicity is due to arsenic’s effect on many cell enzymes, which affect metabolism and DNA repair. Medical experts will tell you that long-term exposure to arsenic, either in drinking water or any other source, can cause cancer in the skin, lungs, bladder and kidney. It can also cause other skin changes such as thickening and pigmentation, “ sources said.

“We are not saying KCM has not done anything about this. They have put up strict safety and protection measures and that’s why it is important that the mining firm tells the nation how it is handling this highly contaminated concentrate to allay fears because the four per cent of arsenic gas is too much for any mine in the world for smelting. Other means maybe must be explored.”

The sources said it was believed that the first consignment had a total quantity of 3,000 tonnes of copper concentrate and about 900 tonnes had so far been received.

And responding to a press query, KCM public relations manager Shapi Shachinda stated that arsenic content was common in copper concentrates.

“The concentrates contain some amounts of arsenic, which is a common component of copper concentrates, depending on their source. KCM has taken the necessary precautions to ensure that this and all impurities are captured and safely stored so that there is no adverse impact on the environment or human health,” Shachinda stated.

“The Zambia Environmental Management Authority (ZEMA) has been informed accordingly about the imports of the Chilean concentrates”
He said the concentrate is blended with KCM’s own concentrates and other third party concentrates.

“The company will smelt these concentrates in its Nchanga smelter. The source of the concentrates is the Chilean state-run Codelco, which is the world’s largest copper producer and was once the technology partner of the ZCCM,” Shachinda stated.

“The purchases are part of a programme that KCM is undertaking to ensure that it operates the Nchanga smelter at full capacity. With changes in regulations around VAT refund, it has once more become viable for KCM to purchase concentrates from other local and foreign mining companies and smelt them at its own facilities. Currently, KCM is blending its concentrates with those from mines in the northwestern province and the Democratic Republic of Congo. It is a common practice globally for smelters to buy concentrates where they have excess smelting capacity.

The fate of Konkola Copper Mine, a unit of London listed copper miner, Vedanta Resources Plc, remains uncertain in Zambia as the company is still indebted with other organisations, the latest being a staggering US$59 million owes to Zambia’ Consolidated Copper Mines Investment Holdings (ZCCM IH).

Last year, KCM, Zambia’s leading producer of copper and cobalt was embroiled in a contractual obligation with a power supplier to the mines on the Copperbelt.

The Copperbelt Energy Corp. which provides an average 530 megwatts of power to teh mines on the copperbelet daily, is owed by KCM in excess of US$44 million in commercial debt of which partial payment has been made and the full amount is yet to be settled, a move which caused production interruptions at some of its critical operations at its Chingola and Konkola mines.

There was no immediate comment from CEC’s spokeswoman Chama Kalima or KCM spokesperson Shapi Shachinda how much has been paid towards offsetting the US$44 million. However sources close to the miner say, the miner is struggling to offset the debt, although not yet paid in full.

This is because of various other obligations it needs to undertake, especially that it is also seeking to secure a refund in excess of US$200 million from Government through Zambia Revevenue Authority, owed in unrefunded Value Added Tax (VAT), like many other multinationals based in Zambia that are exporters.

A report by the Auditor General reveals that KCM is yet to resolve the US$59 million it owes the country’s holding company under a Settlement Agreement signed in February 2013.

The report on Accounts of Parastatal Bodies and other Statutory Institutions for the 2013 financial year states further that the mining company did not honour a Settlement Agreement signed between the two entities and has an outstanding balance due to ZCCM-IH amounting to US$59,684,655.

A Settlement Agreement had been signed on February 11, 2013, as a full and final settlement of all claims due under or pursuant to the Price Participation Agreement, which KCM had failed to honour previously, the report adds.

“KCM Plc agreed to pay ZCCM-IH amounts totalling US $119,744,655 over a period of four years in line with the payment schedule as follows: US$46,324,655 to be paid on or before August 31, 2013; US$73,420,000 to be paid on or before September 30, 2016 in accordance with the payment schedule,” part of the report reveals adding.

As of September 2014, KCM Plc had not honoured the Settlement Agreement and had only paid a total amount of US$16,500,000 out of US$76,184,655, which was due as of September 30, 2014, leaving a balance of US $59,684,655.

The report further indicates that although KCM failed to honour the Settlement Agreement, ZCCM-IH, on the other hand, also failed to trigger an enforcement clause stipulated in the Agreement.
The agreement stipulated that in case KCM failed to pay a deferred amount at the next instalment date, ZCCM-IH was permitted to take legal action for monies owed through the English courts or by arbitration in respect of the deferred amount and any interest that would have accrued pursuant to clause 5.

Contrary to clause 5 of the Agreement, as of November 2014, there was no evidence to show that ZCCM-IH had taken any legal action for monies owed.

ZCCM-IH has had “poor performing loans” with Ndola Lime Company Ltd, with the latter having failed to pay the former over US$7 million in an installment due last June. “On 29 July, 2011, ZCCM-IH signed a loan agreement with Ndola Lime Limited an amount of US $26,000,000., adds the report.

A review of the agreement repayment schedule and accounting records revealed that Ndola Lime Limited should have repaid a total of US$7,356,990 as at June 30, 2014. However, Ndola Lime Limited had not made any payments to ZCCM-IH as of August 2014 and ZCCM-IH had not enforced the default clause of the contract,”

Last year, the mining company, with a labour force of over 10,000 workers was embroiled in various debt obligations which also attracted bailiffs to seize property belonging to the company to recover what was due to them in various obligations.

Amid a US$44 million commercial debt with Copperbelt Energy Corporation, KCM was faced with another commercial obligation with Mitchell Drilling International of Australia which through their bailiffs pounced on the property it has in Acacia House in Lusaka demanding to be paid what was due to them.

According to the report by the Post newspaper, the bailiffs acting on behalf of their client besieged Acacia House to try and recover US$5 million owed to the drilling company for the supply of goods and services and demanded 10 percent interest.

This operation follows KCM’s failure to pay for the drilling services Mitchell Drilling rendered after the two parties entered into a contract signed on June 27, 2008. According to the agreement, the paper added, the contract ran between June 2008 and November 2011 during which Mitchell Drilling did surface drilling and reverse circulation at Konkola and Nchanga mines.

Mitchell drilling sued KCM in the Lusaka High Court for breach of contract and failure to settle the outstanding amount of 731, 546.31 Euros that had accumulated. On March 14, 2013, the Lusaka High Court entered judgment in favour of Mitchell Drilling International limited and Mitchell Drilling Zambia limited who were the plaintiffs in the matter ordering KCM to pay the said monies.

order for a lasting solution to the impasse between the miner and power provider, Copperbelt Energy Corporation which had earlier demanded to be paid US$$44 million in commercial obligations for power supplied to the mine.

Nonetheless, the Post reported, KCM had earlier contested the High Court decision by applying for an order for stay of execution pending hearing and determination of the appeal in the Supreme Court.
On June 23, 2013, the High Court granted KCM the said order subject to the mining company paying the judgment sum of K5, 830, 424 into an Escrow bank account within 30 days from the said date, the paper stated.

However, KCM appealed against this ruling arguing mining operations would be affected should they pay the colossal sum as ordered. On September 18, High Court judge Flavia Chishimba dismissed KCM’s conditional stay of execution and ruled that the mining company pays Mitchell Drilling the said outstanding amount with 10 per cent per annum interest., the Post added in its report.

As the KCM indebtedness continues to unfold, Zesco, the sole generator of power in Zambia claims the miner owes the utility in excess of IS$110 million in power supplied to the company, according to former Managing Director Cyprian Chitundu in a report to President Edgar Lungu recently.