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Zambia’s mine law change will be investor-friendly

Zambia is trying to find a mechanism acceptable to mining companies that will ensure the government is paid dues from them, says the country’s mines minister.

Zambia probably will approve this year an amendment to its mining law, which will be beneficial to companies operating in Africa’s biggest copper producer, Mines Minister Yamfwa Mukanga said.

The changed Mines and Minerals Act will allow for longer licensing permits so investors “have the confidence that they will have security of tenure,” he said in an interview in Cape Town today.

While the government wants the state to be involved in mining joint ventures, “we are not going to have a situation where we are going to move towards nationalization,” he said. “We are trying to attract more investment in the country by reviewing the legal framework. We are not going to go backwards.”

Glencore International Plc and First Quantum Minerals Ltd. are among international mining companies with operations in Zambia. The southern African nation’s annual copper production is expected to reach 1.2 million metric tons by 2015 compared with 700,000 tons last year, Mukanga said.

There are no plans to introduce a so-called windfall tax on mining now, he said.

“It can’t be completely off the table,” Mukanga said. “For now it is off the table because we believe it has nothing to do with getting more revenue.”

Zambia is trying to find a mechanism acceptable to mining companies that will ensure the government is paid dues from them, Mukanga said.

Export Levy

The government’s decision on whether to waive a 10 percent export levy on metal concentrate, as requested by First Quantum, will be based on what’s best for Zambia, Mukanga said.

“We will review the amount of smelting capacity we currently have in the country,” Mukanga said. “If the amount of smelting capacity is such that it is underutilized, we’ll say no. If it is fully utilized and we don’t have excess capacity, then we’ll say yes, export.”

If the duty remains, the economics of First Quantum’s Enterprise project, located in the northwest of the country, are “borderline,” Tristan Pascall, an assistant general manager at the company, said on Jan. 25.

Zambia introduced the levy on the export of ore and concentrates in November 2011 as it sought to increase local value addition to mineral products.

Enterprise Operations

The Enterprise operation, which will be the only nickel producer in the country after Albidon Ltd. mothballed its Munali mine in December, will produce 38,000 tons of the stainless- steel raw material annually in its first phase, the company said on Dec. 12. Phase two could reach 60,000 tons yearly.

There are no nickel smelters in Zambia and the scale of the mine First Quantum is building doesn’t justify constructing one, according to John Gladston, resource optimization manager for the Trident project, which incorporates the Sentinel and Enterprise mines.

First Quantum has a 60,000-ton stockpile of copper concentrate worth $100 million at its Kansanshi mine, about 10 kilometers (6 miles) north of Solwezi, according to Operations Director Matt Pascall.

Copper for delivery in three months retreated 0.4 percent to $8,238 a ton by 2:08 p.m. in Johannesburg, extending its decline this year to 3.1 percent.

–With assistance from Matthew Hill in Johannesburg. Editors: Ana Monteiro, Bryson Hull

To contact the reporter on this story: Franz Wild in Cape Town at fwild@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

©2013 Bloomberg News

 

 
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