Recent adjustments made by the Zambian Government on mining incentives given to multinational companies operating in the Southern African and Africa’s top copper producer will not harm the country’s desired investment growth in the sector, a report says.

Recently, the Government reviewed various incentives accorded to mining companies in their pursuit to increase their copper outturn as the country strives to raise output of the red metal from the prevailing 960,000 tones per annum to the projected 1.5 million tones per annum by 2016-spurred by the oncoming projects.

The report is titled: ‘Mining in Africa Country Investment Guide and was released during the ongoing 20th Mining Indaba in Cape Town, South Africa held under the theme-‘Investing in African Mining’.

It notes that revoked tax incentives, increase in mining royalties and more stringent laws regarding financial reporting have not been sufficient to substantially affect investment in the Zambian mining sector.

Zambia is among seven other countries in Southern Africa, Zambia inclusive as earned a position among the top 20 most exciting African countries. These include Mozambique, South Africa, Malawi, Zimbabwe, Namibia, Botswana and Madagascar.

The guide examines five regions on the continent – Central Africa, East Africa, North Africa, Southern Africa and West Africa – encompassing a total of 53 countries.

The eight Southern African mining states have been categorized into two groupings noting those offering a low-risk environment with proven geological potential and others offering greater risk, yet less exploited mineral resources.

South Africa, Botswana, Namibia and Zambia are in one category while Zimbabwe is embraced in the latter grouping. Mozambique and Malawi are in another.

The guide has on South Africa noted that despite the country having had labour disputes and falling production in recent years, it continues to dominate African mineral production-a potential that upholds its reputation.

The guide notes that the increased mechanisation of the local mining sector could be beneficial to the country once implemented.

It further notes that South Africa still has geological potential, and increased mechanisation of its mines-all which are labour intensive compared to other mining jurisdictions which if maximized could create a revival of the industry.”

The guide noted on Botswana’s diamonds strength as being predominant over other mineral potential the country is endowed with and that although Botswana has recorded the second-largest amount of coal in Africa it remains to develop its infrastructure to maximize the resource.

Namibia remains one of the few African states which have formulated an official strategy for engaging with emerging economies, commending the country for its efforts, what with the influx of direct foreign investment.

Zimbabwe has been cited the most risky jurisdiction for investors of any type, although it has not been completely written off, given its holding of the August 31, 2012 Presidential and general elections last August coupled with its undisputed and vast mineral potential the country is endowed with. According to the country’s mineral reserves, Zimbabwe has approximately 30 percent of the world’s diamond reserves with additional and substantial deposits of gold, platinum, coal, among other metals lying unexploited in various parts of the country.

Mozambique and Malawi have been cited as being ‘slightly higher risk investment destination points largely because of their relatively under-developed mining sectors. It however notes Mozambique’s potential in coal industry while Malawi’s emerging uranium metal and other strategic minerals as being key to foster growth of the African state, noting that the two countries have potential to grow substantially if the sectors are nurtured.

Zambia plans to review the mining policy before the end of this year to trigger increased economic growth that will culminate into the country attaining a middle income status by the year 2030, says mines energy and water development minister, Christopher Yaluma.

Yaluma says plans are underway to revise the Mines and Minerals Act number 7 of 2008 to facilitate increased growth in the mining industry and trigger growth in other sectors including transport and energy that remain stifled.

Speaking during the ministerial forum at the 20th Mining Indaba in Cape Town, South Africa, Wednesday, Yaluma said the principal legislation governing the mining industry has been the mines and minerals development act no.7 of 2008 based on government’s commitment to apply modern principles of transparency and accountability in the management of mineral resources.

The Act. broadly deals with licensing and regulation of mining activities and is currently being reviewed to ensure a balance that will create a competitive environment thriving on a sustainable mining industry to benefit Zambians while concurrently rewarding investors.

The revision of the Act will seek to address various challenges being faced in the sector including redressing unnecessary bureaucracy in the issuance of mining rights as well as reviewing the inadequate size and duration of prospecting licences.

It will also seek to redress the appeal procedures and also seek to retain a tenement in situations where progression to mine development becomes impossible because of adverse economic conditions or technological constraints.

Yaluma noted that although mining has been the engine of Zambia’s economic growth development active since the 1930s, the Government has been pursuing policies and implementing measures to grow the industry and enhance its contributions to economic development.

This growth in the mining sector is not possible without a proper policy and regulatory framework which government has put in place.

Zambia has an articulate policy on mining which was adopted recently and aims at ensuring an ideal environment to encourage private investment in the exploration and exploitation of minerals.

Through the .policy, government aims to ensure the development of a profitable mining industry contributing to the sustainable development of the country.

In that set up, the role of government remains that of ensuring an enabling environment for the development of a vibrant and orderly mining industry contributing to the economic development of the country.

Over the years, the country has recorded increased exploration and mining activities which demonstrates the country’s untapped mineral potential and favoutable investment climate.

Giving an outlook of the investment climate for mining in Zambia in Zambia, Yaluma said in the past few years a number of expansion projects at existing mines have taken place necessitating the establishment of new mines resulting in the increased mineral production.

Copper production by large scale mines in the past three years rose by eight percent from 677,604 tonnes in 2011 to 759,784 tonnes in 2013 and it is projected to increase to one million when the Sentinel project at Kansanshi mine, a unit of First Quantum Minerals Limited comes on stream in 2015.

While planning to improve the policy and legal framework the government further seeks to implement programmes in other sectors to support the growth of the mining industry.

“It is a known fact that the mining industry cannot grow to an extent of making significant contribution to economic development if the necessary infrastructure is not in place. inadequate infrastructure (energy and transport) is one of the factors affecting the development of the mining industry.” Said Yaluma

In redressing the challenges of inadequate power supply in the country, the Government is undertaking various projects to increase power generation capacity by 1,500 megawatts by next year which include upgrading and constructing various power projects.

These include upgrading and extending the Kariba North Bank power capacity to 360 megawatts, construction of the 750 megawatt Kafue Gorge Lower hydro power plant which is critical for the provision of adequate energy in Zambia and the Southern African Power Pool (SAPP).

The Government wants to finalise the construction of the 120 megawatt Ithezi Thezi hydro power project and finalizing of the 300-900 megawatt thermal power plant being pursued by Maamba Collieries Limited.

It is the Government’s desire to create a vibrant mining industry that will make significant contributions and assist the country turn into a prosperous middle income state by 2030.

This is envisioned to be done through the creation of a well organized public private partnership driven mining sector that will also contribute about 20 percent of Gross Domestic Product (GDP) and also provide a platform for sustainable economic growth for the country.

To achieve these goals, the Government seeks to establish new large scale mining operations, given the vast mineral wealth the country is endowed with through intensified explorations for the development of large scale mining operations and create employment and business opportunities while contributing to wealth creation.

This will largely be achieved through tapping into the vast amounts of metallic and industrial minerals that include gemstones and other energy resources including coal, oil, gas and uranium.

It is Government’s desire to further promote value addition to the mining industry to enhance benefits from mineral resources, given the considerable investment in the area.

It is estimated that only one percent of the copper produced from the mining industry is utilized in the manufacturing sector with the rest being exported in unprocessed form.

In the gemstone sector, the value chain of mining lapidary jewellery offers an opportunity for investment and that currently only few small lapidaries exist cut and polished gemstones would significantly contribute to export earnings and employment generation.

Furthermore, there are abundant occurrences of industrial minerals and dimension stones that provide a basis for setting up of value addition industries, Yaluma added.

He revealed that 40 –percent of the country is geologically mapped at a scale of 1;100,000, implying that there are unknown potential.and that investing in the area can lead to opportunities for exploration for various minerals which will eventually result in development of new mines.

The exploration for oil and gas is also Government’s desire to encourage investment particularly the petroleum potential which has remained untapped in Zambia.

The Government, basing on the results of the preliminary work conducted, has demarcated the country into blocks. Some of the petroleum blocks, which were reserved for government. were allocated with nine licences and were given to successful bidders.

On value addition, the Government is encouraging the setting up of smelting facilities to process manganese into ferromanganese.

Yaluma reiterated the Government’s desire to encourage more investment into the country, given Zambia’s stable investment destination coupled with good mining sector regulations that offers vast investment opportunities ranging from exploration to value addition. to a serious investors in mining.

“Zambia is generally a low-risk investment destination and has attracted significant foreign investment in the recent past.” Yaluma said.

“You are all welcome to investment in the mining sector in Zambia and partner with government to translate the mineral resources into wealth for all.”

He commended organizers of the mining indaba for their efforts noting that the event had come at an opportune time considering the level of mining activities taking place in various parts of the continent.

Other than Kansanshi Copper Mines Plc which has sought to dual list its shares in Zambia and abroad, most of the multinational companies with operations in the country are undecided whether to partially list shares in Africa’s leading copper producer to defray costs of raising capital for projects.

Recently, Commerce minister Emmanuel Chenda appealed to mining companies to consider listing on Lusaka stock exchange and a cheaper and nearest source of raising capital for their financial obligations while operating in Zambia.

Presently, only Kansanshi Copper Mines, the world’s eighth largest copper producer and a unit of First Quantum Minerals Limited, listed on the Australian bourse, has sought to open its shareholding to the public.

Others, including Vedanta Resources Plc’s Konkola Copper Mines and Mopani Copper Mines, a unit of Glencore International AG of Switzerland, among others remain outside the local bourse.

With the reluctance by most mining companies to dual or partial list on the Lusaka Stock Exchange, despite its 20-years of operations as a local capital market, regulators and managers of the capital market are using “moral suasion” to excite the foreign multinationals to consider, says Security and Exchange Commission Secretary and Chief Executive, Wala Chabala.

“We have tried to persuade them to consider coming to the LuSe and list their shares for easy access to cheaper finances but we are still talking,” he said in Lusaka today on the sidelines of the briefing of the media on the stock market’s performance in the last quarter of 2013.

LuSE chief executive Officer, Brian Tembo said it has been the desire of the capital market in Zambia with 21 listed companies, to entice mining companies for access to cheaper capital to meet their project needs but many of them have remained silent despite the Government’s desire to embrace them locally.

Two years ago Konkola Copper Mines (KCM) had indicated its desire to dual list on the London Metal Exchange as well as Lusaka’s capital market but reversed its intentions citing market forces at play.

The Toronto, London and Lusaka Stock Exchange listed copper miner is owned by first quantum minerals and is one of Zambia’s most tax compliant companies.
It had by the end of 2012 since its inception in 2006 paid the government about US$1.6 billion in form of taxes.

It had planned to also spend about $16 million or K80 billion kwacha by the end of 2012 under its corporate social responsibility programme, said its spokesperson, Godfrey M’siska recently.

Kansanshi mine has a labour force of about 6000 people and is the largest tax payer in the country as it pays about $1.5 million daily to the Government treasury.

By the end of 2010, it had produced about 231,000 tons of copper and 110 tons of gold which it exported outside the country.

Kansanshi Mining plc operates one of the largest copper mines in Africa. It is 20 percent owned by ZCCM-IH and 80 percent by First Quantum Minerals.
Currently, Kansanshi has capacity to produce 250,000 tonnes of copper up from 100,000 when the mine opened, the company said on its website.

The multi-stage expansion project, when operational, will ramp up copper production to 400,000 tonnes and will also significantly increase the gold output. The project is expected to be completed by 2015.

Source: Mining News Zambia