Mer 18 Jan 2012 14:52
Zambia Seeks Greater Mining Profits
KAMPALA, Uganda—The Zambian government is seeking a greater role in the mining sector for state mining company, Zambia Consolidated Copper Mines Investments Holdings, known as ZCCM-IH, according to a senior official, in a move highlighting the new government's continued efforts to gain a bigger share of the profits generated by the sector.
Since the September election of Michael Sata as president of Africa's top copper miner, the government has introduced a number of policies aimed at tightening the state's grip on the country's booming mining sector, which is tipped to hit two million metric tons of copper output in the next five years. Analysts see the changes in Zambia as part of a broader African shift toward resource nationalization as global demand for commodities continues to soar, with countries including Zimbabwe, Guinea and South Africa all considering legislation aimed at nationalizing mine projects, but some fear investor confidence will suffer.
"Our target is to ensure that ZCCM-IH gets an active role in the mining sector, we want to break foreign dominance," Minister of Mines and Natural Resources Wilber Simuusa said.
The government is currently in talks with stakeholders including landowners, tribal chiefs and small-scale miners as it seeks to acquire at least two green field projects to be developed by ZCCM-IH, Mr. Simuusa said. Negotiations are also continuing with mining companies operating in the southern African nation as the government seeks to increase ZCCM-IH's stake in existing copper mines from 10-15% to at least 35%.
"In the next two weeks we should be able to conclude talks toward the acquisition of the first green field project," meaning new mines in areas where mining operations haven't previously been conducted, located mainly outside the country's Copperbelt province.
Mr. Sata's election victory ended a 20-year dominance of the former ruling party, the Movement For Multiparty Democracy, and the 74-year-old former police officer has quickly attempted to leave a legacy as a champion of populist policies. Mr. Sata premised his campaigns on populist policies such as job creation, increasing mine taxes and increasing the state's stakes in mine projects.
Zambia's mining operations are concentrated in the copperbelt, an area some 300 kilometers north of the capital Lusaka near the border with Congo, mainly due to inadequate exploration elsewhere, although some huge discoveries have been made outside the copperbelt in recent years, including Barrick Gold Corp.'s Lumwama and Kansanshi, owned by First Quantum Minerals Ltd.
Mr. Simuusa said that ZCCM-IH will also acquire minority stakes in many other green field projects, mainly outside the copperbelt.
Mr. Sata's new policies such as controls on copper exports and higher royalties are mainly aimed at delivering on populist campaign polices, but they have already rattled mine investors who fear they threaten to reverse the sector's impressive growth in the past few years.
According to Fredrick Bantubonse, director of Zambia's Chamber of Mines, such abrupt policy changes are shaking investor confidence.
"A stable fiscal regime is what every investor yearns for and we believe this is being undermined," he said.
ZCCM-IH, which replaced the former mining parastatal in the late 1990s following the privatization of the country's mining sector, already holds minority stakes in copper mines including Mopani, Luanshya, Chambishi and Konkola. However the company's participation in the sector remains dismal, hence the need for higher stakes, Mr. Simuusa said.
ZCCM-IH hasn't been able to pay dividends to the government since its creation because most of the mines in which it holds stakes either declare losses or continue to plow back profits in expansion projects, company officials said. However, ZCCM-IH has at least $170 million in cash from the sale last year of its stake in Lumwana Copper Mines, which it can use to kick-start a mining project.
Currently, ZCCM-IH only operates the Ndola Lime Company, a major supplier of lime to copper and cobalt mines in the copperbelt.
Under its revived role, ZCCM-IH could also start by reviving operations Munali Nickel Mine which was closed late last year, amid low global nickel prices, according to Sumuusa. ZCCM-IH is drawing up an alternative plan for the troubled mine, which is currently under care and maintenance as Australia-based Albidon Ltd. is experiencing cash-flow problems due to low global nickel prices.
Spurred by an investment boom and higher global copper demand, Zambia's mining sector has made massive progress in the past three years, enabling the country to attain a historic record copper output 820,000 tons in 2010.
