Message Mer 23 Mai 2018 07:10

Vedanta Africa has its work cut out turning around Zambia co

Restoration of profit, and cobalt and electricity generation are just three of the many objectives new Vedanta Africa Base Metals CEO Deshnee Naidoo has set for the underperforming Konkola Copper Mines in Zambia.

The barely profitable Konkola has already cost Vedanta, the London-listed Indian diversified mining and energy company, about $3bn, with another $1bn earmarked to lift production from the mines and processing plants up to 500,000 tonnes of copper a year.

In the nearer term, Naidoo has to ensure the Konkola complex delivered to plan.

"My mandate is to have Konkola sustainably deliver copper at 300,000 tonnes a year or more. Two-thirds of that will come from own production and one third from third parties," she said in an interview.

In the longer term, Konkola would focus on growth, unlocking the potential at the deposit containing 16-million tonnes of copper at a high 3% grade. Zambia has some of the world’s highest-grade copper deposits.

Of the African asset base of zinc mines and development projects in Namibia and SA, the copper assets in Zambia are the highest priority for Naidoo, who was promoted to CEO of Vedanta Africa Base Metals after a solid start in the company bringing the new Gamsberg zinc mine in SA into production and overseeing a $200m investment to extend the life of the Skorpion Zinc mine in Namibia.

The short-term aim at the Konkola complex is to quickly reduce costs, bring in contract mining companies at its underground operations and ensure the solid fourth quarter of its 2018 financial year was replicated for the balance of the year to take advantage of a rising copper price, Naidoo said.

From a mining point of view, one of priorities is accelerating underground development, which entails developing working areas in advance of mining to give sought-after operational flexibility. Ideally, the underground operations should have three months’ worth of development but is probably at a third of that now.

The plan, much like it was at the zinc operations in SA, was to bring in contractor firms but to deploy Konkola staff into those contracts, Naidoo said. As Zambia’s largest private sector employer, with up to 13,000 staff, it was critical to keep as many people in jobs as possible. With the need for extra underground development and the growth plans, there was a high likelihood of a large number of jobs being saved, she said.

One of the projects in the $1bn expenditure plan was to produce copper cathode, a higher value product than the anode coming from Konkola, as well as a $120m project to produce a purer version of cobalt, which is leaving the mine as an alloy with copper. Sorting out the profitability of the underlying assets would underpin the $1bn investment, of which Vedanta has already spent $250m.

As part of that work Vedanta was talking to the Zambian government about expediting value-added tax rebate payments, which at times were delayed by up to six months. If the payments could not be expedited, there could be some sort of offset to improve cash flows at the Konkola complex, which needed $60m a month to sustain operations.

The balance of the investment, some $300m, will include building a 200MW power plant, but bringing the complex to breakeven and profitability was essential, Naidoo said. Vedanta is a large power producer in India and would bring that experience to Zambia and possibly into a broader Southern African power strategy, she said.