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Zambia to up copper output

ZAMBIA will be the second largest contributor to global copper by 2018, the latest International Copper Study Group (ICSG) report indicates.

According to the report, Global copper production capacity at mine level is expected to grow at an average annual rate of six per cent to reach 27.4 million tonnes a year in 2018.

The report shows that, globally, Peru is expected to contribute the largest show of 26 per cent followed by Zambia, which is currently second largest copper producer in Africa.

The two countries are among the six which will together account for 66 per cent of the global copper production increase.

“Peru is projected to account for 26 per cent of the additional capacity from new mine projects and expansions through 2018, followed by Zambia, Mexico, Mongolia, China and the Democratic Republic of Congo. Together these six countries will represent 66 per cent of the world growth,” the ICSG said.

In its bi-annual directory of copper mines and plants, the Lisbon-based research group states that concentrate output will represent more than 80 per cent of the expansion with production jumping by 4.8 to 21.7 million tonnes in 2018.

More than 900,000 tonnes of solvent-extraction or electro-winning capacity will be added over the same period to reach 5.7 million tonnes capacity.

Projects are also being planned in countries that currently do not mine copper, including Afghanistan, Ecuador, Ethiopia, Fiji, Greece, Israel, Panama, Sudan and Thailand.

By 2018, total expected copper production capacity from projects starting in these new copper mining countries could reach 150,000 tonnes per year, and capacity could continue to increase well above one million tonnes per year if projects planned beyond 2018 in these countries are developed,” the ICSG indicates.

Concurrently, production from countries that started mining copper in the last decade is expected to increase to 550,000 tonnes per year by 2018 from only 4,000 tonnes per year in 2003.

Annual copper smelter capacity growth is forecast to lag behind mine output expansion, growing an average 3.1 per cent per year to reach 22.5 million tonnes per year in 2018, an increase of 2.6 million tonnes or 13.1 per cent from 2014.

Industry News

Zambia to triple power generation in two years with solar

LUSAKA- Zambia expects to triple power output to 6,000 megawatts (MW) in 2 years through expansion of solar energy by foreign investors, the head of its investment agency said.

Erratic electricity supplies have hit mining in the continent’s second biggest copper producer, where the bulk of its generation capacity of 2,200 MW of power is water-powered.

The power problems and copper price slide have driven the kwacha currency to record lows amid a selloff in commodity-linked currencies as top copper consumer China’s economy has slowed.

Zambia Development Agency (ZDA) Director General Patrick Chisanga said he had held “very positive” talks with an unnamed German company aiming to invest $500 million in a solar power plant but did not disclose its planned location.

“It is planned that they could produce about 400 megawatts of power in two steps,” Chisanga told Reuters.

“This is still at discussion stage but the investor is very keen and we envisage that early in the first quarter of next year we should see some serious development on the ground.”

Another group of investors from Italy were looking to set up a solar plant in the Lusaka South multi-facility economic zone and two others in the Western and Northwestern provinces.

“The proposals they put on the table suggest to me that these are very serious investors and they have the capability as well as the financial capacity to invest,” he said, without giving details

Added to that, power generation from Zambia’s Kariba power stations has dropped due to low rainfall in the previous season, forcing Zambia to implement power blackouts.

“This has been a wake up call for us. It has taught us that we need to diversify our sources of energy instead of relying on hydro which in turn relies on a good rainfall every year,” he said.

A number of new investments, including that by Africa’s richest man, Nigeria’s Aliko Dangote, whose firm has opened a cement plant, were setting up their own power plants and aiming to feed any surplus into the national grid.

The ZDA had also issued an investment licence to Sunbird Investments Ltd which was looking to put up a $150 million biofuel plant using cassava, Chisanga said.

“The totality of all this should help us to ramp up our production of power to the levels that we need to get to which is ultimately about 6,000 megawatts,” Chisanga said.
Investee Company News

China’s CNMC says followed the law in closing Luanshya Copper Mines

China’s CNMC Luanshya Copper Mines followed Zambian law when it closed the Baluba mine and sent more than 1 600 workers on forced leave due to plunging prices and energy shortages, the company said on Monday.

Zambia Government had threatened to revoke Luanshya’s mining licence if the company did not reinstate workers. A slide in global copper prices has put pressure on Africa’s second biggest producer of the metal, with export earnings depressed despite the kwacha’s slump against the dollar this year.

“As a law abiding corporate citizen, we have always followed the Zambian laws,” CNMC Luanshya Copper Mines spokesman Sydney Chileya said in a statement, adding that it did not plan to make employees redundant. Those placed on forced leave would receive a monthly allowance and other entitlements such as medical cover, the company said. Chileya said the entire Luanshya Mine would have collapsed within three months if the company had not suspended production at Baluba.

The Mine Workers’ Union of Zambia (MUZ) said on Saturday it would challenge the decision, which it alleged was made without consulting labour unions. Glencore’s Zambian subsidiary Mopani Copper Mines, is in talks with the government and unions over plans to suspend its production, but a source close to the company said on Friday a large number of workers would be retained.
Investee Company News

Copper mine to continue production

Zambia-based copper miner Konkola Copper Mines (KCM) has affirmed that it has not made a decision to close its Nchanga underground mine or scale down operations at the Nkana refinery, following media reports alleging closures. KCM, a subsidiary of London-listed global diversified natural resources company Vedanta Resources, is one of Africa’s largest integrated copper producers.

It has mines at Konkola in Chililabombwe, Nchanga near Chingola and Nampundwe in the Central province of Zambia. Its operations include openpit and under-ground mines, several concentrators, a state-of-the-art smelter and a refinery. In addition to copper, the company also produces cobalt, pyrite and acids. “The company’s operations remain open and production is continuing. No workers have been laid off and no contracts have been terminated,” the company states, noting that the basis of media stories circulating is an unofficial memo, which has no official sanction from within the company.

However, KCM notes that the implications of electricity cuts are still unclear, with the company in consultation with power provider Copperbelt Electricity Company and the Zambian government regarding the implications of load-shedding.

Zambia is experiencing a power supply deficit of 30%, as water levels at State-owned power utility Zesco’s hydroelectric plants decreased significantly, owing to drought.

Performance Focus

Meanwhile, KCM CEO Steven Din noted in the company’s July newsletter that, while the company continues to improve its operational performance, KCM has “a long way to go in ensuring that business plan target”. Din highlighted that integrated mine metal production at the end of the first quarter is 85% of the business plan target.

KCM is developing the flagship Konkola Deep Mining Project, in Chililabombwe. The project involves expanding the production of copper ore at the Konkola mine by accessing the rich orebody that lies beneath what current operations have been exploiting. “This involves the sinking of a new mine shaft to the depth of 1 500 m, the deepest new shaft sinking project in Africa,” according to Vedanta Resources’ website.

Din further highlighted in the company newsletter that there is steady improvement at the Konkola underground mine. “Phase 1 mining of ventilation and slot raises has been completed in the Konkola East section and Phase 2 of secondary development is progressing well,” he stated. Moreover, copper-in-concentrate production has been sustained above 4 000 t for the last two months, Din noted, adding that Konkola “achieved 85% of the business plan target in the first quarter, with production constrained by power outages resulting in flooding at the end of April and beginning of May”.

Nchanga Smelting and Refining He further highlighted that “overall, Nchanga has continued seeing an upward trend in production [having] achieved 89% of the business plan in the first quarter”. The Nchanga mining operations are situated near Chingola. The operations mine primary copper and cobalt through underground and openpits.

Media reports in the newsletter also highlighted that the Nchanga Open Pit Cut II increased production in the first quarter and “beat monthly targets by more than 100% in April and May”. Din noted that, although the company was affected by challenges, such as low dump truck availability, Old East Mill throughput constraints, power outages and power grid instability, the team has corrective action plans in place to stabilise production. Further, the Nchanga openpit mine achieved 123%; Nchanga underground mine achieved 97%; Tailings Leach Plant achieved 97%; and support service achieved 93% of the amount detailed in the business plan.

Din, however, acknowledged that the Nchanga smelter was unable to achieve its targets, owing to low receipts of integrated and custom concentrates resulting in knock-on, low production at the Nkana refinery. The Nchanga smelter achieved 67% of business plan targets, while the Nkana refinery achieved 56%. He added that the company has no control over the copper price, which is set in international markets.

“While we saw steady increases in the copper price at the start of the year, in June and July, this reversed sharply,” he stated. Therefore, Din emphasised the company’s need to redouble its business efforts under the circumstances.

Industry News

Zambian kwacha hits record low on power, copper price woes

“Many entities are likely to use the dollar as the currency of choice for transactions, thereby putting more pressure on the demand side,” said analyst Peter Sitamulaho of the local Bonds and Derivatives Exchange.

“The kwacha is afflicted by lack of price transparency, lack of liquidity, too few market participants dominated by less than six banks, the majority being international banks,” he added.

The kwacha would remain on the back foot as a resolution to global and domestic economic concerns were out of sight, Zambia National Commercial Bank said in a note.

In addition to weak global prices, Zambian mines have also been hit by a power crunch, with one copper producer, China’s NFC Mining, shutting down some of its operations at local operations as a result, according to a union.

Zambia’s Konkola Copper Mines (KCM) owned by London-listed Vedanta Resources Plc has asked 133 employees to stay away from work on full pay while the company undertakes a review of the operations.

The government has said it plans to build 17 hydro power generation plants and a thermal plant by 2030, which together will add over 4,000 MW to power supply.

Investee Company News

Gemfields raises $35.14m in Singapore emerald, amethyst auction

Zambia-focused precious stones miner Gemfields has garnered revenues of $35.14-million from its most recent auction of predominantly rough emeralds extracted by subsidiary Kagem Mining, as well as the sale of amethyst mined by 50%-owned Kariba Minerals.

Held in Singapore from August 31 to September 4, the auction followed seven successive emerald auctions held in Lusaka, Zambia, and marked the return of Zambian emerald auctions to the broader international market.

The auction saw 600 000 ct of higher-quality emerald extracted from Kagem placed on offer, with 18 of the 19 lots on offer sold, generating auction revenues of $34.7-million. The emerald auction realised an overall average value of $58.42/ct – the third-highest figure on record. The company’s 19 auctions of emeralds and beryl mined at Kagem since July 2009 had generated $360-million in total revenues, the company disclosed in a statement on Monday.

Gemfields’ amethyst auction, meanwhile, saw 11-million carats of higher-quality amethyst extracted from Kariba placed on offer, with 11 of the 16 lots offered being sold, generating auction revenues of $400 000 from the 10.1-million carats sold.

The amethyst auction realised an overall average value of $0.43/ct – an increase of 144% compared with the $0.17/ct realised in the February 2015 auction. Commenting on the auction results, CEO Ian Harebottle said that, with 98% of the emeralds sold, it was “very pleasing” to see Zambian emeralds continuing to enjoy such firm demand, aided by Gemfields’ return to running an auction in Singapore “Our Singapore auction has delivered another very strong result for our Kagem emeralds.

Despite severely depressed global commodity prices, well-documented difficulties in the diamond sector and recent volatility across international financial markets, emerald prices remain as robust as ever. “The countercyclicality often associated with precious gemstones, and their reputation as a store of value in turbulent times, have shone through,” he remarked. Investec, however, commented that the auction results were disappointing. “This perhaps indicates that the emerald market is not completely insulated from the pains the diamond industry has been going through.

The long-term value proposition remains intact in our view but near-term earnings could come under pressure if this trend is not reversed,” it said. Meanwhile, Harebottle noted that it was also pleasing to see that the prices received for amethyst had increased “markedly” since the last auction in February. “I’m delighted that these results underscore the intended vision and trajectory for coloured gemstones and for Gemfields,” he enthused. The proceeds of the auctions would be fully repatriated to Kagem Mining and Kariba Minerals in Zambia, Gemfields advised. The company’s next auction was expected to take place in November, comprised predominantly of lower-quality emerald and beryl.

Industry News

Zambia worried by slowdown in China, low copper price

Zambia is worried about the economic slowdown in China, a key consumer of its copper, and expects a further decline in revenue due to sharply lower prices for the commodity, a senior official said on Wednesday.

“We are worried because China is one of the major consumers of our copper,” Secretary to the Treasury Fredson Yamba told reporters.

“We had anticipated that copper prices would decline but not to these levels … my take is that the revenue is going to decline further.”
Corporate Social Investment, ZCCM-IH News

ZCCM-IH helps sponsor the Bembas vs Ngonis Annual Golf Tournament

ZCCM-IH helped sponsor the Bembas vs Ngonis Annual Golf Tournament at the Chainama Golf Club on Sunday 23 August 2015. As part of its Corporate Social Responsibility efforts, ZCCM-IH helped support this tournament whose proceeds will go towards the promotion of Junior Golf at the Chainama Golf Club. Dr Pius Kasolo, the Chief Executive Officer of ZCCM-IH who was the Guest of Honour at the event, also played a round of golf in support of the event.

Later in the evening during the Prize Giving Ceremony, he reminded those in attendance that ZCCM-IH shares were available for purchase as part of the GRZ sale down of its Shares and that the Company was the best investment they can make on the Lusaka Stock Exchange due to its extensive diversified portfolio which includes the major mines in Zambia.

Investee Company News

Barclays Bank Zambia finances the $828 million for a 300 Megawatts Mamba Coal power plant

BARCLAYS Bank Zambia Plc has financed Maamba Collieries Limited’s (MCL) 300 megawatts coal fired power plant at a cost of US$828 million.

The financing would enable MCL to complete the construction of two by 150MW plants and the construction of the new transmission line to connect to the national power grid.

Barclays Bank Zambia managing director Saviour Chibiya said the construction of the 300MW coal fired plant would help alleviate the national electricity deficit describing it as a significant step towards diversifying power generation in the country.

“Barclays Bank Zambia Plc is proud to be a part of this important transaction which is a true landmark for Zambia.

“Our role as Financial Advisor, Book Runner, Mandated Lead Arranger, Global and Hedge Coordinator is demonstration of the Bank’s commitment to support the growth of the Energy sector in line with the National Development plan of the country,” he said in a statement.

Barclays Bank Plc was appointed Global Coordinator and Lead Mandated Lead Arranger, to act on behalf of the sponsors Nava Bharat (Singapore) Pte Ltd and ZCCM Investment Holdings Plc to raise the funds.

The project finance debt was raised via two portions , the first being US$ 365 million with ECA backed tranche supported by Sinosure which is the first project finance in Sub Sahara Africa.

The second part involved a US$150 million from Development Financial Institutions (DFI).

This project could pave the way for more Sinosure backed infrastructure transactions beyond the 300MW of new power capacity.

This project would contribute approximately 17 per cent to Zambia’s installed electricity generation capacity and in the process unlock economic growth potential in the region where current electrification rates were in the region of 20 per cent.

Mr Chibiya said it was expected that project financing in Africa would take a cue from this transaction of how deals could be structured covering multiple geographies, in the infrastructure space, which was the need of the hour in Africa.

Investee Company News

3000 KCM jobs on the line as the mine suspends operations at the Nchanga underground unit

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.