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Tripling Zambia’s copper output ambitious but attainable best-case scenario

SOKWANI CHILEMBO Things have been heating up in the exploration sector, with a couple of dozen prospects in the thick of second and third round earn-in negotiations, listings and capital raisings

SYNCLINORIUM SHAFT Zambian mining investment firm ZCCM-IH is committed to see that Mopani Copper Mines delivers optimal production levels to contribute to the national production target of three-million tons of copper by 2030

16th September 2022

By: Tracy Hancock

Creamer Media Contributing Editor

     

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Key prerequisites need to be in place if Zambian President Hakainde Hichilema is to tap into the potential developmental benefits of the “oil of Zambia” by tripling the country’s yearly copper output in the next ten years, says Zambia Chamber of Mines CEO Sokwani Chilembo.

“Tripling the country’s yearly copper output from today’s level is an extremely ambitious goal and, given the medium- to long-term demand and price tailwinds, it is one that is an attainable best-case.”

Policy, fiscal and regulatory stability, coupled with global competitiveness will be needed to attract sustained primary exploration mapping funding, exploration capital and mining investment at levels such as those we have seen in the Democratic Republic of Congo (DRC) or leading South American copper jurisdictions in the last one-and-a-half decades.

This is in addition to increasing the availability of power by harnessing hydro potential from the El Niño-resilient northern watershed river system shared with the DRC, as well as upgrading logistics infrastructure and upskilling labour, explains Chilembo.

“Government’s strong commitment to avoiding surprise shifts in policy, taxes, regulations and fees has garnered material support from the International Finance Corporation to entrench that this is how Zambia will manage its affairs going forward.”

While the nation has the cost challenges of being landlocked, its political stability, water and hydropower availability, stable industrial relations and logistical optionality to multiple ports present a lower-risk geological endowment than market sentiment has priced it currently.

The turnaround of the policy instability and public debt distress that has skewed perception is well under way, with commercial and bilateral reprofiling consensus having been attained and a consequent International Monetary Fund support programme likely to be affirmed soon, adds Chilembo.

Consequently, Zambia has become a more attractive mining destination, compared with copper-rich countries Peru and Chile, whose mining industries are troubled by community protests and strike action-fuelled pressure for nationalisation policies.

“The lessons learnt from South American and South African experiences about community dissatisfaction with local government service delivery make plough-back through efficient sharing of mining tax revenue with host communities by the central fiscus a key priority for Zambian stakeholders,” says Chilembo.

Contributions by mining companies through corporate social responsibility and environmental programmes add to this tax plough-back to further the permanent upliftment of local communities to ensure that environments are restored as close as possible to their pre-mining states while delivering sustainable post-mining livelihoods.

“Failure of any or all of these four aspects has had dire and far-reaching policy consequences for miners in South America and operational ones for miners in South Africa,” he states.

Hichilema’s government is committed to facilitating and maintaining long-term private-sector-led growth momentum in the economy by creating a formal continuous public–private dialogue framework to ensure high engagement with all industry.

Revenue plough-back and social investment will be a key part of such a dialogue and engagement in line with Zambia’s recently strengthened community development funding framework, says Chilembo.

Positive Developments

“Things have been heating up in the exploration sector, with a couple of dozen prospects in the thick of second and third round earn-in negotiations, listings and capital raisings.”

Players, such as global mining groups Rio Tinto and Anglo American, have been active on this front, while gold and copper miner Barrick Gold is increasing its exploration campaign aiming to create a super-pit at its existing flagship Lumwana copper mine that could extend its life by up to 60 years.

Several Mainland China- and Hong Kong-listed mining firms also continue to invest in exploration, with midtier mining group Metorex, of which Chinese mining company Jinchuan is the holding company, leading the way by having maintained the Chibuluma mine.

Further, Canada-based mining and metals company First Quantum Minerals’ (FQM’s) partially built $250-million Enterprise nickel mine will be fully commissioned in the next six months, after a decade in limbo, despite being Africa’s largest potential nickel producer.

This is in addition to the $1.35-billion S3 expansion at FQM’s Kansanshi copper mine and the previously closed Chibuluma copper mine “stirring back to life”, says Chilembo.

Nickel producer Mabiza Resources’ Munali nickel mine and the world’s largest emerald mine – coloured gemstone supplier Gemfields’s Kagem operation – are also ramping up capital expenditure, while UK-based mining company Moxico Resources’ new copper leach facility is expected to come online at Mimbula in Chingola before the end of the year.

“It will also be good to see South Africa’s world-leading expertise in deep mining and its attendant proprietary mining equipment and technical services (METS) supplier base diversifying geographically, and in terms of mineral portfolios, playing a bigger part in the turnaround of the old Zambian Copperbelt underground operations.

“Momentum is clearly building, as measures to make Zambia more competitive are being rolled out with government’s removal of import duties on mining capital equipment being the latest example in the last few weeks,” Chilembo tells Mining Weekly.

The level of growth being sought through copper would also significantly increase the industry’s employment.

“This will need to be augmented by working with government, multilaterals and the financial services industry to avail third-party capital to the local METS sector and the mine-hosting economies, where up to four times more jobs will be created given export opportunities into several of Zambia’s eight neighbours who are seeing increasing exploration and mining activity,” says Chilembo, adding that greenfield mining investments will also open up the hinterland to development.

Edited by Nadine James
Features Deputy Editor

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