Up and running: Konkola Copper Mines reopened its Nchanga copper mine last month
Up and running: Konkola Copper Mines reopened its Nchanga copper mine last month

Indian mining company Vedanta Resources announced plans last month to invest US$1bn in its Zambian unit, Konkola Copper Mines (KCM), creating 7,000 jobs.

This followed plans unveiled in February by Canadian-owned First Quantum Minerals (FQM) to invest an equal amount in its operations in the northwestern part of the country, nearly three years after first postponing the capital investment.

Higher copper prices are behind the surge of confidence in Zambia’s mining sector.

The international price of copper hovered at about $6,000/t in March, after almost three years of levels closer to $4,000/t.

During that time, a number of companies were forced to downscale their investments, while others placed mines in "care and maintenance".

Confidence in the sector has also been boosted by government’s about-turn both on taxes — tax hikes for copper miners were abandoned last year — and on its plans to withhold more than $500m in Vat refunds owed to mining companies.

In 2014, government withheld Vat refunds for companies that failed to produce import certificates from countries that bought their copper. The certificate requirement aimed to force transparency among mining companies and help improve government tax collection. But government was forced to change tack after companies objected.

In a show of confidence, Vedanta Resources chairman Anil Agrawal says he has a 50-year vision for KCM: "I want KCM to be the largest integrated copper producer in Africa, the pride of Zambia and Vedanta Resource’s hub for copper and cobalt production in Africa."

KCM last month also reopened its Nchanga underground mine in Chingola on the Copperbelt. It was put under care and maintenance in 2015.

FQM chairman Philip Pascall says his company’s new investment will be in capital projects and a new smelter.

"It’s for the expansion of what we call S3. We need mining investment of $350m and ... then another smelter will cost at least $750m. So you can see why that kind of decision takes some time. We need to be very confident of the commodity prices and also we have to make sure that the funding is available."

FQM already owns an $800m copper smelter in Zambia that was commissioned in 2015. The company has invested more than $5.7bn in its Zambian mines since 2000 and has paid $3.6bn in taxes since 2004. It owns Kansanshi, the biggest copper-gold mine in the country, and the $2bn Kalumbila mine, as well as a 16% share in Glencore Xstrata mines in the Copperbelt province. It also employs nearly 10,000 people.

The new investment plans are partly based on projected stability of the mining tax system, which government has promised after earlier uncertainly. It changed the mining tax regime three times in 2015 alone.

Earlier this year finance minister Felix Mutati told journalists that the government would ensure stability in the sector by maintaining tax rates. "We have told mining companies that we are not touching [tax rates] and the mines are clear in their minds about this," Mutati said.

Security of electricity supply has also helped confidence. All mining companies are receiving enough electricity to operate at full capacity after months of power rationing. Companies such as FQM and KCM had earlier announced the suspension of some operations due to power shortages.

Mines minister Christopher Yaluma recently said KCM intends to commission a new mine, the Konkola Deep Project, and that it would revive underground operations elsewhere in the country.

Yaluma, who attended the annual Investing in African Mining Indaba in Cape Town earlier this year, described the conference as the best in four years. "I say so because of the interest of potential investors — it has been overwhelming.

"We have seen a rising number of potential investors who have committed to come to Zambia," he said at the time."

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