KONKOLA Copper Mines has started importing copper concentrate from Chile which contains arsenic, a toxic chemical element that causes cancer if exposed to humans in uncontrolled quantities.

But the mining company says it has taken the necessary precautions to ensure that “this and all impurities are captured and safely stored so that there is no adverse impact on the environment or human health.”

According to studies, concentrated arsenic content can contaminate groundwater, leading to widespread epidemics and if exposed in larger quantities to humans, the brittle steel-grey semi-metal can cause arsenic cancer.

Technical sources at KCM also feared that the copper concentrate the company was importing from South America could be harmful to humans and the environment.

The sources said the workers who are handling the copper concentrate feared for their health as the consignment from Chile had levels of arsenic as high as four per cent.

“If you recall from your chemistry, arsenic is not like any other ordinary chemical friendly to the environment and human beings. Arsine gas is highly toxic. The toxicity is due to arsenic’s effect on many cell enzymes, which affect metabolism and DNA repair. Medical experts will tell you that long-term exposure to arsenic, either in drinking water or any other source, can cause cancer in the skin, lungs, bladder and kidney. It can also cause other skin changes such as thickening and pigmentation, “ sources said.

“We are not saying KCM has not done anything about this. They have put up strict safety and protection measures and that’s why it is important that the mining firm tells the nation how it is handling this highly contaminated concentrate to allay fears because the four per cent of arsenic gas is too much for any mine in the world for smelting. Other means maybe must be explored.”

The sources said it was believed that the first consignment had a total quantity of 3,000 tonnes of copper concentrate and about 900 tonnes had so far been received.

And responding to a press query, KCM public relations manager Shapi Shachinda stated that arsenic content was common in copper concentrates.

“The concentrates contain some amounts of arsenic, which is a common component of copper concentrates, depending on their source. KCM has taken the necessary precautions to ensure that this and all impurities are captured and safely stored so that there is no adverse impact on the environment or human health,” Shachinda stated.

“The Zambia Environmental Management Authority (ZEMA) has been informed accordingly about the imports of the Chilean concentrates”
He said the concentrate is blended with KCM’s own concentrates and other third party concentrates.

“The company will smelt these concentrates in its Nchanga smelter. The source of the concentrates is the Chilean state-run Codelco, which is the world’s largest copper producer and was once the technology partner of the ZCCM,” Shachinda stated.

“The purchases are part of a programme that KCM is undertaking to ensure that it operates the Nchanga smelter at full capacity. With changes in regulations around VAT refund, it has once more become viable for KCM to purchase concentrates from other local and foreign mining companies and smelt them at its own facilities. Currently, KCM is blending its concentrates with those from mines in the northwestern province and the Democratic Republic of Congo. It is a common practice globally for smelters to buy concentrates where they have excess smelting capacity.

The fate of Konkola Copper Mine, a unit of London listed copper miner, Vedanta Resources Plc, remains uncertain in Zambia as the company is still indebted with other organisations, the latest being a staggering US$59 million owes to Zambia’ Consolidated Copper Mines Investment Holdings (ZCCM IH).

Last year, KCM, Zambia’s leading producer of copper and cobalt was embroiled in a contractual obligation with a power supplier to the mines on the Copperbelt.

The Copperbelt Energy Corp. which provides an average 530 megwatts of power to teh mines on the copperbelet daily, is owed by KCM in excess of US$44 million in commercial debt of which partial payment has been made and the full amount is yet to be settled, a move which caused production interruptions at some of its critical operations at its Chingola and Konkola mines.

There was no immediate comment from CEC’s spokeswoman Chama Kalima or KCM spokesperson Shapi Shachinda how much has been paid towards offsetting the US$44 million. However sources close to the miner say, the miner is struggling to offset the debt, although not yet paid in full.

This is because of various other obligations it needs to undertake, especially that it is also seeking to secure a refund in excess of US$200 million from Government through Zambia Revevenue Authority, owed in unrefunded Value Added Tax (VAT), like many other multinationals based in Zambia that are exporters.

A report by the Auditor General reveals that KCM is yet to resolve the US$59 million it owes the country’s holding company under a Settlement Agreement signed in February 2013.

The report on Accounts of Parastatal Bodies and other Statutory Institutions for the 2013 financial year states further that the mining company did not honour a Settlement Agreement signed between the two entities and has an outstanding balance due to ZCCM-IH amounting to US$59,684,655.

A Settlement Agreement had been signed on February 11, 2013, as a full and final settlement of all claims due under or pursuant to the Price Participation Agreement, which KCM had failed to honour previously, the report adds.

“KCM Plc agreed to pay ZCCM-IH amounts totalling US $119,744,655 over a period of four years in line with the payment schedule as follows: US$46,324,655 to be paid on or before August 31, 2013; US$73,420,000 to be paid on or before September 30, 2016 in accordance with the payment schedule,” part of the report reveals adding.

As of September 2014, KCM Plc had not honoured the Settlement Agreement and had only paid a total amount of US$16,500,000 out of US$76,184,655, which was due as of September 30, 2014, leaving a balance of US $59,684,655.

The report further indicates that although KCM failed to honour the Settlement Agreement, ZCCM-IH, on the other hand, also failed to trigger an enforcement clause stipulated in the Agreement.
The agreement stipulated that in case KCM failed to pay a deferred amount at the next instalment date, ZCCM-IH was permitted to take legal action for monies owed through the English courts or by arbitration in respect of the deferred amount and any interest that would have accrued pursuant to clause 5.

Contrary to clause 5 of the Agreement, as of November 2014, there was no evidence to show that ZCCM-IH had taken any legal action for monies owed.

ZCCM-IH has had “poor performing loans” with Ndola Lime Company Ltd, with the latter having failed to pay the former over US$7 million in an installment due last June. “On 29 July, 2011, ZCCM-IH signed a loan agreement with Ndola Lime Limited an amount of US $26,000,000., adds the report.

A review of the agreement repayment schedule and accounting records revealed that Ndola Lime Limited should have repaid a total of US$7,356,990 as at June 30, 2014. However, Ndola Lime Limited had not made any payments to ZCCM-IH as of August 2014 and ZCCM-IH had not enforced the default clause of the contract,”

Last year, the mining company, with a labour force of over 10,000 workers was embroiled in various debt obligations which also attracted bailiffs to seize property belonging to the company to recover what was due to them in various obligations.

Amid a US$44 million commercial debt with Copperbelt Energy Corporation, KCM was faced with another commercial obligation with Mitchell Drilling International of Australia which through their bailiffs pounced on the property it has in Acacia House in Lusaka demanding to be paid what was due to them.

According to the report by the Post newspaper, the bailiffs acting on behalf of their client besieged Acacia House to try and recover US$5 million owed to the drilling company for the supply of goods and services and demanded 10 percent interest.

This operation follows KCM’s failure to pay for the drilling services Mitchell Drilling rendered after the two parties entered into a contract signed on June 27, 2008. According to the agreement, the paper added, the contract ran between June 2008 and November 2011 during which Mitchell Drilling did surface drilling and reverse circulation at Konkola and Nchanga mines.

Mitchell drilling sued KCM in the Lusaka High Court for breach of contract and failure to settle the outstanding amount of 731, 546.31 Euros that had accumulated. On March 14, 2013, the Lusaka High Court entered judgment in favour of Mitchell Drilling International limited and Mitchell Drilling Zambia limited who were the plaintiffs in the matter ordering KCM to pay the said monies.

order for a lasting solution to the impasse between the miner and power provider, Copperbelt Energy Corporation which had earlier demanded to be paid US$$44 million in commercial obligations for power supplied to the mine.

Nonetheless, the Post reported, KCM had earlier contested the High Court decision by applying for an order for stay of execution pending hearing and determination of the appeal in the Supreme Court.
On June 23, 2013, the High Court granted KCM the said order subject to the mining company paying the judgment sum of K5, 830, 424 into an Escrow bank account within 30 days from the said date, the paper stated.

However, KCM appealed against this ruling arguing mining operations would be affected should they pay the colossal sum as ordered. On September 18, High Court judge Flavia Chishimba dismissed KCM’s conditional stay of execution and ruled that the mining company pays Mitchell Drilling the said outstanding amount with 10 per cent per annum interest., the Post added in its report.

As the KCM indebtedness continues to unfold, Zesco, the sole generator of power in Zambia claims the miner owes the utility in excess of IS$110 million in power supplied to the company, according to former Managing Director Cyprian Chitundu in a report to President Edgar Lungu recently.

Despite the various problems afflicting Konkola Copper Mines in recent months in addition to a commercial standoff with Copperbelt Energy Corporation over US$44 million in energy services, the miner has upheld its tax obligations and remitted over K700 million in taxes to Zambia Revenue Authority two years ago.

Deputy mines minister Richard Musukwa told lawmakers in Lusaka, Sept. 30 that KCM remitted a total of K782,269,066.72 in taxes to the Zambia Revenue Authority (ZRA) and that the company was not selling copper to Vedanta Resources but was selling at the international market on the London Stock Exchange.

Responding to oral questions from who wanted to know the total number of workers employed by Vedanta Resources Plc, whether KCM sold copper to Vedanta Resources, how much copper was sold in 2012 and how much money was paid by KCM in form of taxes to the ZRA in 2012 Musukwa stated that the company had a total number of 7,553 workers as of August 29, 2014.

The lawmakers further sought clarifications as to whether the miner had been audited in view of reports that the company had been undeclaring its earnings in Zambia. Recently, its chairman Anil Agarwal was reported to have mocked Zambians over a US$500 million profit the mine earns in Zambia annually after investing a paltry US$25 million in 2004.

However, Musukwa stated that the Government was working to ensure it cleared suspicions that Kim was under declaring its taxes so that the Zambians get the best in terms of taxation.

Recently, KCM spokesperson Shapi Shachinda lamented that the company was among the highest paying in electricity tariffs in Zambia under the Bulk Power Supply Agreement with Copperbelt energy Corporation, the distributor of power to the mines, which is claiming US$44 million debt from the miner.

In a statement recently Shachinda stated that KCM was facing power restrictions following a commercial dispute between the two parties. KCM now pays more than K700 million (rebased currency) per year in power tariffs.

The dispute follows CEC’s unilateral increase in power tariffs since April 2014 contrary to the provisions of the Power Supply Agreement (PSA) between KCM and CEC. The CEC has also been refusing to generate invoices based on electricity tariffs agreed through the PSA to facilitate payments of bills by KCM for power supplied to the mine, Shachinda added.

It should be noted that prior to April 2014, CEC had increased power tariffs by over 100% in accordance with the PSA and this has resulted in KCM having the highest power tariffs in the mining industry in Zambia.

The restriction in power supply will adversely affect Konkola Copper Mines’ operations and compromise safety of the employees and job security. The operations of the Nchanga integrated business unit have already grossly been affected.

KCM regrets that CEC has chosen not to pursue this matter in accordance with the PSA provisions on dispute resolution.

Operational problems at Konkola Copper Mine (KCM) have heightened because of a myriad of problems besieging the country’s leading producer of copper and cobalt.

Until Friday, Sept.26, KCM had power restricted to a number of operations including the concentrator at the Tailings Leach plant and the underground section which later was flooded with water, following a US$44 million debt accrued in unpaid energy bills to power supplier on the Copperbelt – the Copperbelt Energy Corporation (CEC).

Despite the unpaid bills, CEC decided to restore 100 percent power to KCM premised on the understanding that the company would meet its obligation as directed earlier by the Lusaka High Court that the company pay the US$44 million which had been outstanding since April this year.

CEC spokeswoman, Chama Kalima said the restoration of full power supply to KCM was done out of goodwill despite KCM failing to meet its financial obligations adding that is not right for any business that means well to wait for court orders for it to pay for services consumed.

“It is our hope that in response to this show of good faith, KCM will pay all its outstanding bills and begin to pay all their future bills as they fall due,” she said.

CEC believes it is important that all parties take learning points from this incident and begin to uphold obligations in accordance with the Power Supply Agreement (PSA), she added in a statement following interventions by the Ministries of Mines to have the matter harmonized to avoid ‘sabotage’ to the economy.
“Irrespective of this decision, CEC still reserves all its rights per provision of the PSA with KCM, which CEC will exercise should it become imperative to do so in the near future,” Kalima added.

The refusal by KCM to pay against invoices issued for about six months, even on undisputed amounts, has adversely affected CEC’s business and subjected the power company to subsidizing and sustaining KCM operations for the said period.

As a consequence, CEC has also been unable to fully discharge its obligations to ZESCO Limited.

Despite their continuous defaulting on payments, KCM also argues that they are not liable to pay interest, in complete contravention of the PSA.

“All this is unacceptable in normal business practice and should not be encouraged,” Kalima stated.

KCM spokesperson Shapi Shachinda has since confirmed the restoration of power to affected areas of the mines but lamented that the discharge of water from underground would take some weeks to be undertaken.

This is in the wake of the company losing US$3.3 million in revenue as well as 482 tons of copper in interrupted production of the red metal over the past few days.

on the operations of the mines by the management and seeks that the miner should revive its operations by injecting fresh capital into the company, these sentiments were brought to light by Vice President and leader of Government business in Parliament, Guy Scott.

Responding to lawmakers, Scott said it was his view that fresh capital be pumped into the mining company.

The lawmakers wanted to know the future of the mining company in view of reports in the media to which Vice President replied; “Our Government’s view is that KCM needs a fresh capital injection. Our experts, consultants and advisors say there is a requirement to put in more money if KCM is to be more viable.

”When Government suggested to KCM to recapitalise the mine, the other shareholders, Vedanta, responded by saying Government itself through ZCCM Investment Holding must put in money, Scott added.

Vedanta had also further suggested that they be allowed to borrow money from the local banks.

Dr Scott said the idea of borrowing money locally would not be okay as other sectors such as agriculture would be affected, he told lawmakers during question and answer sessions on Sept. 26.

Meanwhile, Minister of Mines, Energy and Water Development Christopher Yaluma earlier on Sept. 25 cited poor management of Konkola Copper Mines (KCM) as the major reason the mining firm has failed to pay the Copperbelt Energy Corporation (CEC) US$44 million in electricity bills.

KCM is currently going through serious financial challenges and that Government is closely monitoring the situation at the company to ensure it does not result in job losses.

He told lawmakers that is sad that the giant mining firm will not be able to meet the set production levels in the next quarter due to the power supply which has been restricted to 90 percent by CEC instead of the required 100 percent.

“Mr Speaker, although KCM is capable of running the mine, it will not manage to meet the production levels we have set in the next quarter due to the power restriction.

“But what I have to state is that KCM is going through serious financial challenges due to poor management of the mine and this has also resulted in the company failing to pay the money it owes CEC in electricity bills,” the Minister said.

Earlier, KCM, through its parent company Vedanta Resources mocked Zambians over its U$500 million profit being made annually in the Southern African country since it invested a paltry US$25 million in 2004.

And President Michael Sata had earlier warned the company against undertaking its planned mechanization of the mining company in which over 1,579 workers were to be laid off to replace them with machinery.

President Sata had also warned Vedanta to follow the country’s policy of seeking to create employment than facilitate “redundancies” to the nationals.

However, Shachinda in a statement has reaffirmed KCM’s commitment to remain in Zambia and contribute to the country’s growing economy and that there were no plans to leave the country in spite of the current problems being faced.

Vedanta Resources have since 2004 invested close to US$4 billion in operations and corporate social responsibility programs.

Source: Mining News Zambia