Copper mining expansion continues in Zambia

Industrial harmony has returned to copper mines -Photo©JEAN-CLAUDE COUTAUSSE--FEDEPHOTO

Copper output should rise from 800,000tn this year to 1.5m tn in 2017 as foreign companies invest in expanded capacity.

According to the Chamber of Mines of Zambia, copper output is expected to hit 1.5m tn in the next five years.

Among new projects due to come online are the expansion of Lumwana Copper Mine, First Quantum’s $2bn greenfield Trident project, China Nonferrous Mining Corporation’s $832m copper project and the Lubambe mine jointly owned by Brazil’s Vale, African Rainbow Minerals and state-owned ZCCM Investments Holdings.

Industrial harmony returned after a turbulent start to 2012. Copper output dropped to 421,280tn in the first half of 2012 from 463,236tn in the same period last year, the central bank said in August.

Analysts see production slowing to around 820,000tn in 2012 due to declining prices and a slowdown in China.

Mining companies say that unrest in the aftermath of the election victory of President Michael Sata and his populist Patriotic Front (PF) in September 2011 depressed output.

Striking miners at Glencore’s Mopani mine, First Quantum’s Kansanshi mine and Konkola Copper Mines, part of Vedanta Resources, all won pay rises in 2012.

Foreign mining firms plan to invest another $3bn in the sector in the next three years.

The PF doubled the rate of copper-related royalties to 6% in the 2012 budget, but many operators maintain their generous development agreements secured when they first invested.

Copper’s contribution to the overall tax take is minimal, and only First Quantum-owned Kansanshi Copper has paid a significant amount of corporate income tax.

To boost revenue collection, the government announced that from 2013 the capital expenditure deduction rate will be reduced to 25% from 100% and only from the year the capital asset is brought into use.

“Small, small changes that pluck the mining sector’s tax incentives will negatively affect the performance of the expansion of mining sector investments,” said Konkola Copper Mines chief executive officer Jeyakumar Janakaraj.

The changes are expected to hit brownfield investments the most.

Deputy finance minister Miles Sampa says: “The focus now is to boost \[the] capacity of government institutions led by the ministry of mines so that we ensure total compliance of mining companies to the existing legislation.” ●