Zambia miners seek state relief

Windhoek – Zambia might consider tax breaks or incentives to mining companies to discourage them from scaling down capacity due to poor performance of copper prices and rising production costs.

Mining companies hit by the sluggish performance of copper in particular are holding talks with the Zambian government, which says it will consider miners’ cases on merit.

Christopher Yaluma, Zambia’s Mines and Energy Minister, said companies facing viability problems are making submissions to the government to help ease their plight.

Minister Yaluma said the government would be flexible when addressing concerns affecting copper production.

“For most underground mines production costs have been going up, at a time when the price of copper has not been doing well. We have to look at this situation and see how we can assist,” Minister Yaluma said.

“We will decide whether to give tax breaks or concessions or any other form of incentive which can encourage them to produce more.

“But we also have to look at their performance data, we are looking at a trend spilling over the past six months and whatever proposal each individual companies makes to us, it has to be backed with production data,” Minister Yaluma said.

Zambia – home to Glencore Xstrata, Vedanta Resources, First Quantum Minerals and China’s CNMC among others – is Africa’s top copper producer.

The country shares the Central African Copperbelt with the DRC, its northern neighbour, and produced 824 976 tonnes of copper in 2012.

On July 5, Konkola Copper Mines, a unit of Vedanta Resources, said it had shelved plans to lay off 2 000 workers after holding “progressive discussions with the government and unions on challenges facing the company”.

Minister Yaluma said a copper price of above US$7 000 per tonne would ensure profitability of mining companies.

“But unfortunately companies at one point got used to a price of above US$8 000 per tonne and this is despite the fact that when some of them went into production prices were around US$5 000 per tonne,” he said.

The Mines Minister said Zambia wants annual copper output to top one million in the coming few years.

Copper mining is the mainstay of the Zambian economy, accounting for more than 75 percent of the country’s foreign currency earnings.

The Zambian government has also said that it wants all electricity supply contracts with mining companies with operations along the copperbelt, which do not reflect the cost of generating electricity renegotiated.

Minister Yaluma said existing contracts between national power utility, ZESCO and Lusaka Stock Exchange-listed Copperbelt Energy Company, which it supplies with power for mining companies, do not factor in the cost of generating electricity.

“There are some few clauses which hold ZESCO, it can’t raise tariffs, it’s boxed in up to around 2020 and in the interim, it is unable to raise tariffs,” Minister Yaluma said.

“There are binding clauses in the agreements which make it very difficult for ZESCO to adjust tariffs and we are saying, let us look at ways of revisiting such agreements.”

He said the energy supply contracts renegotiation would affect “all mining companies along the Copperbelt” such as Konkola Copper Mines and Glencore Xstrata’s Mopani Copper Mines among others.

Energy supply contracts for mining companies in North-Western Province, like First Quantum Minerals’ Kanshansi and Barrick Gold Corp’s Lumwana, would not be renegotiated, Minister Yaluma said. State power utility ZESCO wants to raise US$5 billion for new energy projects.

 

August 2013
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