hingola, 4th November 2015 – Konkola Copper Mines (KCM)has reaffirmed its commitment towards Zambia’s development agenda despite the current challenges it is facing that have affected its operations.

KCM Chief Executive Officer Steven Din says the company’s investment in the mines amounting to $3 billion dollars over the last eleven (11 years) is a clear demonstration of its commitment to this development agenda.

Mr. Din has said this in a statement in commemoration of the company’s 11th anniversary which falls today.

Mr. Din notes that despite the current challenges KCM is facing such as low copper prices and power deficits, the company’s 50 year vision will ensure that KCM still remains in operation for a long time to come through enhanced sustainable operations of its mines.

He adds that to achieve this agenda KCM is examining local economic development opportunities aimed building up the economic capacity of the communities around KCM’s operations to improve their economic futures and the quality of life for all.

He also highlighted the company’s commitment to its CSR programmes in the areas of rural livelihoods, education, health and sports. KCM has spent more than $160million on its CSR projects since Vedanta acquired its interests in the company.

Hesays the company aspires to use the KCM assets as a catalyst to secure economic activity in the Copperbelt and surrounding areas for the next fifty years and beyond, long after KCM has ceased mining.

KCM is working a 50 year vision but this vision depends on the Copperbelt realizing its potential as an economic hub. Mining alone will not achieve this. Agriculture, tourism, logistics, services and trade will all need to make a contribution,

Mr. Din said.

The CEO is confident that with the right strategy, carefully executed in partnership with government, donors and civil society groups, KCM can add substantially to additional economic activity per year in non-mining sectors and create many jobs.

He further notes that generating employment beyond the life of the mines will be the single greatest economic legacy of KCM in the Copperbelt.

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.

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.

Despite the various problems afflicting Konkola Copper Mines in recent months in addition to a commercial standoff with Copperbelt Energy Corporation over US$44 million in energy services, the miner has upheld its tax obligations and remitted over K700 million in taxes to Zambia Revenue Authority two years ago.

Deputy mines minister Richard Musukwa told lawmakers in Lusaka, Sept. 30 that KCM remitted a total of K782,269,066.72 in taxes to the Zambia Revenue Authority (ZRA) and that the company was not selling copper to Vedanta Resources but was selling at the international market on the London Stock Exchange.

Responding to oral questions from who wanted to know the total number of workers employed by Vedanta Resources Plc, whether KCM sold copper to Vedanta Resources, how much copper was sold in 2012 and how much money was paid by KCM in form of taxes to the ZRA in 2012 Musukwa stated that the company had a total number of 7,553 workers as of August 29, 2014.

The lawmakers further sought clarifications as to whether the miner had been audited in view of reports that the company had been undeclaring its earnings in Zambia. Recently, its chairman Anil Agarwal was reported to have mocked Zambians over a US$500 million profit the mine earns in Zambia annually after investing a paltry US$25 million in 2004.

However, Musukwa stated that the Government was working to ensure it cleared suspicions that Kim was under declaring its taxes so that the Zambians get the best in terms of taxation.

Recently, KCM spokesperson Shapi Shachinda lamented that the company was among the highest paying in electricity tariffs in Zambia under the Bulk Power Supply Agreement with Copperbelt energy Corporation, the distributor of power to the mines, which is claiming US$44 million debt from the miner.

In a statement recently Shachinda stated that KCM was facing power restrictions following a commercial dispute between the two parties. KCM now pays more than K700 million (rebased currency) per year in power tariffs.

The dispute follows CEC’s unilateral increase in power tariffs since April 2014 contrary to the provisions of the Power Supply Agreement (PSA) between KCM and CEC. The CEC has also been refusing to generate invoices based on electricity tariffs agreed through the PSA to facilitate payments of bills by KCM for power supplied to the mine, Shachinda added.

It should be noted that prior to April 2014, CEC had increased power tariffs by over 100% in accordance with the PSA and this has resulted in KCM having the highest power tariffs in the mining industry in Zambia.

The restriction in power supply will adversely affect Konkola Copper Mines’ operations and compromise safety of the employees and job security. The operations of the Nchanga integrated business unit have already grossly been affected.

KCM regrets that CEC has chosen not to pursue this matter in accordance with the PSA provisions on dispute resolution.

Operational problems at Konkola Copper Mine (KCM) have heightened because of a myriad of problems besieging the country’s leading producer of copper and cobalt.

Until Friday, Sept.26, KCM had power restricted to a number of operations including the concentrator at the Tailings Leach plant and the underground section which later was flooded with water, following a US$44 million debt accrued in unpaid energy bills to power supplier on the Copperbelt – the Copperbelt Energy Corporation (CEC).

Despite the unpaid bills, CEC decided to restore 100 percent power to KCM premised on the understanding that the company would meet its obligation as directed earlier by the Lusaka High Court that the company pay the US$44 million which had been outstanding since April this year.

CEC spokeswoman, Chama Kalima said the restoration of full power supply to KCM was done out of goodwill despite KCM failing to meet its financial obligations adding that is not right for any business that means well to wait for court orders for it to pay for services consumed.

“It is our hope that in response to this show of good faith, KCM will pay all its outstanding bills and begin to pay all their future bills as they fall due,” she said.

CEC believes it is important that all parties take learning points from this incident and begin to uphold obligations in accordance with the Power Supply Agreement (PSA), she added in a statement following interventions by the Ministries of Mines to have the matter harmonized to avoid ‘sabotage’ to the economy.
“Irrespective of this decision, CEC still reserves all its rights per provision of the PSA with KCM, which CEC will exercise should it become imperative to do so in the near future,” Kalima added.

The refusal by KCM to pay against invoices issued for about six months, even on undisputed amounts, has adversely affected CEC’s business and subjected the power company to subsidizing and sustaining KCM operations for the said period.

As a consequence, CEC has also been unable to fully discharge its obligations to ZESCO Limited.

Despite their continuous defaulting on payments, KCM also argues that they are not liable to pay interest, in complete contravention of the PSA.

“All this is unacceptable in normal business practice and should not be encouraged,” Kalima stated.

KCM spokesperson Shapi Shachinda has since confirmed the restoration of power to affected areas of the mines but lamented that the discharge of water from underground would take some weeks to be undertaken.

This is in the wake of the company losing US$3.3 million in revenue as well as 482 tons of copper in interrupted production of the red metal over the past few days.

on the operations of the mines by the management and seeks that the miner should revive its operations by injecting fresh capital into the company, these sentiments were brought to light by Vice President and leader of Government business in Parliament, Guy Scott.

Responding to lawmakers, Scott said it was his view that fresh capital be pumped into the mining company.

The lawmakers wanted to know the future of the mining company in view of reports in the media to which Vice President replied; “Our Government’s view is that KCM needs a fresh capital injection. Our experts, consultants and advisors say there is a requirement to put in more money if KCM is to be more viable.

”When Government suggested to KCM to recapitalise the mine, the other shareholders, Vedanta, responded by saying Government itself through ZCCM Investment Holding must put in money, Scott added.

Vedanta had also further suggested that they be allowed to borrow money from the local banks.

Dr Scott said the idea of borrowing money locally would not be okay as other sectors such as agriculture would be affected, he told lawmakers during question and answer sessions on Sept. 26.

Meanwhile, Minister of Mines, Energy and Water Development Christopher Yaluma earlier on Sept. 25 cited poor management of Konkola Copper Mines (KCM) as the major reason the mining firm has failed to pay the Copperbelt Energy Corporation (CEC) US$44 million in electricity bills.

KCM is currently going through serious financial challenges and that Government is closely monitoring the situation at the company to ensure it does not result in job losses.

He told lawmakers that is sad that the giant mining firm will not be able to meet the set production levels in the next quarter due to the power supply which has been restricted to 90 percent by CEC instead of the required 100 percent.

“Mr Speaker, although KCM is capable of running the mine, it will not manage to meet the production levels we have set in the next quarter due to the power restriction.

“But what I have to state is that KCM is going through serious financial challenges due to poor management of the mine and this has also resulted in the company failing to pay the money it owes CEC in electricity bills,” the Minister said.

Earlier, KCM, through its parent company Vedanta Resources mocked Zambians over its U$500 million profit being made annually in the Southern African country since it invested a paltry US$25 million in 2004.

And President Michael Sata had earlier warned the company against undertaking its planned mechanization of the mining company in which over 1,579 workers were to be laid off to replace them with machinery.

President Sata had also warned Vedanta to follow the country’s policy of seeking to create employment than facilitate “redundancies” to the nationals.

However, Shachinda in a statement has reaffirmed KCM’s commitment to remain in Zambia and contribute to the country’s growing economy and that there were no plans to leave the country in spite of the current problems being faced.

Vedanta Resources have since 2004 invested close to US$4 billion in operations and corporate social responsibility programs.

Source: Mining News Zambia