Zambia, once viewed as a Central African economic power house, wants to reclaim some of its former glory as Africa's biggest greenfield copper project, Lumwana, is commissioned.
As recently as the 1960s, Zambia was the world's biggest producer of copper but its position was usurped by Chile, about which Anglo American CEO Cynthia Carroll said in Santiago this month: "The success of Chile in establishing a stable macro-economic environment and attractive investment climate is the envy of the world."
Zambia needs to take note of that sort of comment to improve its position as an investment destination and encourage foreign direct investment (FDI) once again.
Zambia's 1964 independence saw the start of its FDI decline, which reached a crisis point in the 1990s. All the while, Chile had been allowed to streak ahead as plans to develop Zambia's mineral-rich North West province, which forms part of the renowned African Copper Belt and houses massive copper deposits, gathered dust.
The boom saw mines reopen, but now mine closure is on more investors lips than mine openers, Glencore, for one seeking to close its Nkana and Mufulira copper mines.
But the exception the Australian-led Equinox Minerals, which flew journalists to its big Lumwana copper mine opening last week.
Equinox CEO Craig Williams said at the opening that the company he cofounded came into Zambia looking for a project that would enhance its stability, and to gain a foothold into Africa.
But sobering was his comment that no fewer than ten companies had previously tried to develop the Lumwana project - which has both copper and uranium - but fell short owing to lack of funding and changes in mining policy in the country.
The Lumwana licence covers 1 355 km2 and includes two major copper deposits, Malundwe and Chimiwungo, as well as 25 exploration prospects, and comes into play when at a time when major producer Codelco foresees the 2010 copper at $1,50/lb - or $3,300/t.
Fairfax reports that the current lower copper prices are still well above production costs for many of the better quality miners.
Catalyst for Change
Zambian President Rupiah Banda made his mark at the Lumwana opening, marvelling at the irony of the Lumwana project being commissioned while the world is still suffering in the aftermath the financial meltdown.
Fairfax mining analysis service expects Lumwana to produce 172 000t of copper a year for the first five years.
"The opening of the Lumwana copper mine will be a catalyst for change in Zambia. It will be the economic turning point that the North Western province and Zambia needs to re-establish itself as a Central African economic powerhouse," Banda predicted.
But to do so, the Zambian government will have to show consistency and ongoing credibility, which has been lacking in the past.
The manner in which Zambia cut, raised and then recut its mining royalty regime turned potential investors away.
While Banda called for others to show the perseverance that Equinox has shown at Lumwana, it would be in Zambia's interests to note that its copper rival, Chile, last month received a credit upgrade from Moody's Investors Service along with a positive outlook at a time when most other countries are receiving downgrades from the same institution.
"As a nation, we need to take up a mindset of perseverance because when challenges look formidable, we can mobilise ourselves and resolutely confront our challenges in order to realise that which others think is insurmountable," said Banda.
He added that the second lesson that could be learned from the development of the project was that success does not come easily, as during the period of planning and developing the Lumwana project, a lot of money was spent on developing associated infrastructure.
"I am informed that, in the 12 years of the development of the Lumwana project, Equinox invested more than $1-billion, which included the development of a modern new town in Lumwana," said Banda
Banda praised the dedication of the former Zambian President Patrick Mwanawasa, describing the late president's commitment to the development of the project as unwavering. He assured Equinox that the current Zambian government would display similar commitment.
"The current Zambian government and the people of this country will support this investment and stand by Equinox to ensure that the Lumwana project is beneficial for all stakeholders," said Banda.
Funding Lumwana today would probably have been an extremely tough task. But Equinox began doing so in a far better capital-raising environment, and Lumwana's uranium upside assisted.
In 2006, Equinox completed three rounds of equity financing totalling $250-million through a short-form prospectus equity issue managed by an international syndicate of underwriters; a private placement equity issue to Zambia Consolidated Copper Mines Investments Holdings, managed by the company; and a second short-form prospectus equity issue, managed by an international syndicate of underwriters. Equinox also announced recently that it has agreed the restructure of its credit facilities.
The company completed a uranium feasibility study in 2008 which showed output of two million pounds a year of uranium oxide and 15 000 t of copper that could be mined simultaneously from the discrete uranium-enriched zones in the Lumwana copper pits.
In May 2008 Equinox Minerals was also able to secure a 99-year land title to 350 km2 for its township and mine operation areas.
The licence is valid for 25 years, from January 2004, and is renewable for a further 25 years.
Production from the copper plant is expected towards the end of the middle of the second quarter while commissioning of the uranium plant is targeted for 2010.
Copper wise, so much hinges on demand.
Fairfax remains cautious about fundamental demand in China being enough to absorb all additional copper imported and produced recently, but says that, if the global stimulus packages result in stronger, sustained demand then there is reason for optimism. The London investment analysts see the US stimulus package in particular as having the potential to cause American copper demand to recover.
Diversified engineering companies Bateman Engineering NV and Ausenco were responsible for the building of the process plant.
Sulphide ore will be processed on-site by conventional flotation methods to produce copper concentrates for shipment to off-site smelters.
Concentrates will then be smelted and refined into metal at smelters either in Zambia, southern Africa or offshore. Negotiations are under way with a number of regional smelters, with letters of intent having been signed with Palabora Mining Company in South Africa, Ongopolo Mining and Processing in Namibia and Mopani Copper Mines in Zambia.
Trucks from the mine will tip directly into a 400 t capacity run of mine (ROM) dump hopper. A primary gyratory crusher will be used to crush the ROM ore from a nominal top size of 1 500 mm to less than 200 mm. Oversize material will be deposited on the ROM pad to be further broken by a mobile rock breaker.
Ore will be reclaimed through apron feeders onto a conveyor belt providing direct feed, at a rate of about 2 500t/h, into the SAG mill. The SAG mill trommel undersize will discharge into a hopper and will be pumped to conventional hydrocyclones, operating in closed circuit with a 26-ft × 40-ft ball mill. The hydrocyclone overflow reports to flotation, while the underflow returns to the ball mill.
The flotation plant will consist of two parallel trains of rougher scavenger cells. The rougher scavenger concentrate will report to the regrind circuit to further liberate the copper minerals. Regrinding will be followed by a conventional cleaner and recleaner circuit to reach final concentrate grade.
The concentrate will be dewatered in a circuit consisting of high-rate thickening followed by pressure filtration to produce a filter cake suitable for transportation. Flotation tailings will be thickened and pumped to the tailings dam. Most of the plant water will be recovered and recycled from the thickener overflows and tailings dam return water. Fresh make-up water will be supplied as required from a river-water dam.
Social Development Key
The Lumwana project is situated in Zambia's North West province, which is predominantly rural. Instead of importing mine workers from developed centres such as Kitwe and Lusaka, Equinox, in conjunction with the Lumwana Mining Company (LMC), have established a comprehensive social upliftment programme, which aims to develop the immediate area surrounding the mine as well as neighbouring Solwezi.
Former Zambian politician, now chairperson of LMC Dr Peter Matoka reported that the Lumwana social upliftment programme was unlike any in Central Africa.
"Various projects are being driven by mine bosses to build schools and libraries in Lumwana and Solwezi. Programmes are also in place to ensure that the best teachers are employed in the schools surrounding Solwezi. Ultimately, the programme wishes to encourage the advancement of literacy in the rural North Western province," says Matoka.
Government is also playing a role in the development of the area. Matoka reports that the Zambian government has made significant donations to the establishment of clinics and hospitals in the area.
And the fruits of the social upliftment programme are already starting to show; a feature of the Lumwana mine is the huge Euclid DT 50 t dump trucks that transport the crushed ore to the process plant. The majority of these trucks are operated by workers from the Solwezi district and are predominantly female.
Construction of the mine started in earnest in late 2006 and has been carried out by about 4 700 local workers, and cost about $760-million.
Matoka said that skills retention in the area is key, especially since the mine's expected to produce its first tonnages towards the end of the second quarter.
"There have been some enquiries to tap into the mine's skills base especially from mines in neighbouring countries. The majority of the enquiry's are centred on the mine's truck operators," says Matoka.
The demand for copper over the past two years has been high; this was mainly driven by demand from China and India, both going through sustained periods of urbanisation.
Economic growth in Asia has slowed considerably since the start of the global financial crisis; reports from China suggest that economic growth has dropped from 11% to 6% during the crisis.
As a result, demand for copper has slowed. However, there is a light at the end of the tunnel. Deutshe Bank head of equities Max Koep reports that copper, along with gold and platinum group metals, will start to regain ground that was lost at the start of the crisis.
This presents Zambia with a unique opportunity to capitalise on increased demand for copper during the course of the year. With beneficiation laws requiring the bulk of ROM ore to be beneficiated locally, Zambia could look forward to a sustained period of economic growth driven by the mining industry.
To watch a video in wich an in-depth view of the Lumwana project, click here.