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Zambian copper production to grow by 7% this year, despite power challenges

JOHANNESBURG (miningweekly.com) – The Zambian government’s support for the mining industry and strong copper prices are expected to drive growth in the country’s copper production for this year, despite ongoing power shortages.

BMI Research on Monday pointed out that, according to data published by the Zambian central bank, Zambia’s copper production reached 362 000 t by June 30, down slightly from the 367 000 t produced in the first half of 2016.

“No details have been given by the Zambian authorities on this decline, but it is likely that Zambia’s ongoing power supply problems have been the key constraint on copper mining activities,” BMI said.

“We are positive on Zambian copper and maintain our forecast of 7% growth this year as Zambian President Edgar Lungu remains supportive of the sector, and rising copperprices incentivise domestic miners to ramp up production during the second half of the year.”

Ongoing power shortages resulting from the country’s dependence on hydropower and rising water tariffs are the key risks facing the Zambian mining sector moving forward.

In August, two of the country’s biggest copper producers, Glencore and First Quantum Minerals, were forced to reduce power at key operations, owing to tariff disputes with electricity provider Copperbelt Energy Corporation.

However, improving rainfall and rising dam levels in the country will ease some of power shortages experienced in recent quarters.

Another key driver of strong Zambian copper production this year will be the positive trajectory of prices in 2017 relative to last year.

Since touching lows of $4 500/t in June last year, copper prices have risen over 57% to $6 810/t in August owing to strong demand from China.

“While it is possible that prices may unwind from current levels towards the end of the year, we think the gradual uptrend over the last 12 months will bode well for mining activity in Zambia.

 

Source: Mining Weekly

Zambia’s 2017 copper output expected to top 850 000 t

LUSAKA – Copper production in Zambia, Africa’s No.2 producer of the metal, is expected to rise to 850 000 t in 2017 from 770 597 t last year, the nation’s vice president said on Thursday.

“Copper production is poised to continue increasing owing to the expansion projects at existing mines and greenfield projects that are ongoing,” Vice-President Inonge Winasaid at a mining and energy conference.

Source : Mining Weekly

Impact of copper strikes fizzles on scrap inflow, mine rebound

LONDON – Disruptions at the two biggest copper mines early this year may have only a muted impact on prices after a surge of scrap metal partially filled the supply gap and a recovery in mine output is due to help in the second half.

A strike at the world’s biggest copper mine, Chile’s Escondida, and other disruptions initially prompted worries about shortages of the metal used in construction and power transmission, pushing up prices.

Analysts polled by Reuters in April expected a copper deficit this year of 17 000 t versus a consensus forecast in January of an 80 000-t surplus.

But some analysts now say supplies will be adequate and that the market will end the year with a modest excess of metal.

“It’s a smaller surplus, but it’s still essentially a surplus,” said Karen Norton, an analyst with Thomson Reuters GFMS.

“There were enough stockpiles during that critical period and there was also the secondary (scrap) offsetting as well.”

The benchmark copper price on the London Metal Exchange climbed 12% early in the year to a peak of $6 204 a tonne by mid-February as investors fretted over supplies, but it has since given up 7%.

BIG MINES RAMP UP
BHP Billiton lifted force majeure this month at Escondida after a strike that lasted 43 days, the longest in Chilean mining history.

The second-biggest copper mine, Grasberg in Indonesia, has been ramping up shipments after the government granted an export permit in April following a 15-week outage related to a dispute over mining rights.

On Friday, Freeport-McMoRan Inc said it was “on a path” to get a new mining deal with Indonesia this year for Grasberg, although the company continued to grapple with labour problems.

While the Grasberg situation has created some uncertainty, other mines such as Chile’s Collahuasi have agreed new contracts.

“Looking forward, we see limited scope for further major, labour-related supply disruptions this year,” analyst Natasha Kaneva at JPMorgan said in a note.

Kaneva forecasts copper mine production to grow by an average of 2.1% year-on-year from April to December and the copper price to weaken to $5 000 by the end of the year.

Mining operations could also benefit from having had time during the strike to perform extra maintenance, said analyst Vivienne Lloyd at Macquarie.

The market remained relatively well-supplied when the two biggest mines were shut after high copper prices late last year drew a wave of scrap metal into the market.

“It looks as though the scrap inflow into the market really diluted the impact of the primary shortage, because we saw scrap moving in, not so much into smelter furnaces, but in place of cathode being consumed by the fabricators,” Lloyd said.

The flow of scrap is now dissipating, which may support copper prices temporarily, she added.

“We saw the second quarter as a bit of a deficit, but we think it will move back towards surplus in the second half,” Lloyd said.

In another sign of healthy supply, copper concentrate treatment and refining charges have risen to the highest levels since mid-February, specialist publication Metal Bulletin said.

The charges, paid to smelters to process concentrates into metal, move higher when supply rises.

Source : Mining Weekly

Tanzania signs $154m contract with Chinese firm to expand main port

Tanzania’s government signed a $154-million contract on Saturday with the state-run China Harbour Engineering Company(CHEC) to expand the main port in the commercial capital, Dar es Salaam.

Tanzania is seeking financing for infrastructure projects as part of its plans to transform the country into a regional transport and trade hub.

Under the contract funded by a World Bank loan, CHEC, a subsidiary of the state-run China Communications Construction Co, will build a roll-on, roll-off (ro-ro) terminal and deepen and strengthen seven berths at Dar es Salaam port.

Tanzania hopes expansion of the port will increase container throughput to 28-million tonnes a year by 2020 from around 20-million tonnes currently.

“Deepening and strengthening of the berths will allow big container ships to dock in Dar es Salaam. All these efforts are being done in order to increase competitiveness of the port,” works, transport and communications minister Makame Mbarawa said at the signing of the contract.

East Africa’s second-biggest economy wants to profit from its long coastline and upgrade its rickety railways and roads to serve the growing economies in the land-locked heart of Africa.

Big gas finds in Tanzania and oil discoveries in Kenya and Uganda have turned East Africa into an exploration hotspot for oil firms, but transport infrastructure in those countries has suffered from decades of under-investment.

Tanzania said in January it will receive a $305-million loan from the World Bank to expand its main port, where congestion and inefficiencies are hampering service delivery.

The port, whose main rival is the bigger but also congested port of Mombasa in Kenya, acts as a trade gateway for landlocked African states such as Zambia, Rwanda, Malawi, Burundi and Uganda, as well as the eastern region of the Democratic Republic of Congo.

The World Bank said in a 2014 report that inefficiencies at Dar es Salaam port were costing Tanzania and its neighbours up to $2.6-billion a year.

Chinese President Xi Jinping announced plans to plough $60-billion into African development projects at a summit in Johannesburg in 2015, saying it would boost agriculture, build roads, ports and railways and cancel some debt.

Source : Engineering News

China says Zambia let go 31 Chinese held for illegal mining

BEIJING – Dozens of Chinese nationals who had been held for illegal mining in Zambia have departed the African country to return home, China’s Foreign Ministry said on Wednesday.

China had complained that Zambia provided no strong evidence of crimes committed by the 31 arrested in the copperbelt town of Chingola, including a pregnant woman and two victims of malaria.

But Zambia’s immigration chief had told Zambian media the Chinese would have to be deported for violating the law.

“After repeated representations by China’s Foreign Ministry and its embassy in Zambia, on the afternoon of June 6, the 31 Chinese citizens that had been seized and detained, boarded a plane and left Zambia smoothly, to return home,” ministry spokesperson Hua Chunying said.

In a letter, the 31 had expressed their “satisfaction” with the Chinese embassy’s efforts on their behalf, Hua told a regular news briefing.

Chinese companies have invested more than $1-billion in copper-rich Zambia, but there has been animosity, with some Zambian workers accusing firms of abuses and underpaying.

In 2012, Zambian miners killed a Chinese supervisor and seriously wounded another in a pay dispute at a coal mine. Zambian police charged two Chinese supervisors at the same coal mine with attempted murder two years earlier, after the shooting of 13 miners in a pay dispute.

Resource-hungry China is investing heavily in Africa, a supplier of oil and raw materials, such as copper and uranium, but critics have warned its companies take with them their poor track record on workers’ rights and environmental protection.

Source : Mining Weekly

China says 31 nationals detained in Zambia for illegal mining

BEIJING – Zambia has detained 31 Chinese nationals for illegal mining in the African country’s copper belt but has failed to provide strong proof of their crimes, a senior Chinese diplomat said as he lodged a complaint.

Lin Songtian, the Chinese Foreign Ministry’s director-general for African affairs, told a Zambian diplomat in Beijing that China understands and supports actions to crack down on illegal mining, the ministry said in a statement late on Sunday.

However, Zambia had not only not provided strong proof of the crimes of the 31 detained but had also detained a pregnant woman and two others with malaria, Lin said.

“China expresses serious concern and resolute opposition to this,” the ministry cited Lin as saying.

China hoped that Zambia could handle the incident appropriately and as soon as possible, and release those who are innocent, Lin said.

Chinese companies have invested more than $1-billion in copper-rich Zambia but there has been animosity, with some Zambian workers accusing firms of abuses and underpaying.

In 2012, Zambian miners killed a Chinese supervisor and seriously wounded another in a pay dispute at a coal mine.

Zambian police charged two Chinese supervisors at the same coal mine with attempted murder two years earlier after the shooting of 13 miners in a pay dispute.

Resource-hungry China is investing heavily in Africa, a supplier of oil and raw materials like copper and uranium, but critics have warned that its companies are taking with them their poor track record on workers’ rights and environmental protection.

Source : Mining Weekly

Independent committee says Pallinghurst’s offer ‘significantly’ undervalues Gemfields

JOHANNESBURG – An independent committee set up by Gemfields to evaluate Pallinghurst Resources’ unsolicited offer to acquire the remaining interest in the company it does not already own, has said the offer “significantly” undervalues Gemfields, its assets and its leading position in the coloured gemstone sector.

Brian Gilbertson’s Pallinghurst on May 19 announced its intention to buy out Gemfields’ minority shareholders in exchange for $150-million in Pallinghurst shares and to delist Gemfields from the LSE’s Aim market.

This comes as Pallinghurst, which already owns 47% of Gemfields, seeks to transition to a diversified miner from its current role as an investment fund.

“The independent committee is unanimous in concluding that the unsolicited offer from Pallinghurst is derisory and clearly undervalues the company. The company has an exceptional management team with a clear strategy to deliver additional shareholder value on a standalone basis from our unique asset base.

“The independent committee believes the unsolicited offer has the potential to dilute Gemfields’ shareholders with inferior assets that offer exposure to more volatile commodities and with less attractive prospects,” committee chairperson Graham Mascall said in a statement to Gemfields shareholders on Wednesday.

The committee, which also includes Clive NewallFinn Behnken, Ian Harebottle and Janet Boyce, advised Gemfields’ shareholders not to take any action on the proposed offer.

Analysts at SP Angel, meanwhile, commented in a note on Wednesday that there is “tremendous unrealised value in the Faberge brand”, which is owned by Gemfields.

“Pallinghurst understands the value of the Faberge brand and how to use it to create value, particularly in the event of a potential sale to a brand leader like LVMH, De Beers or Gucci.

“We currently value Gemfields at 70p a share on its mining business. We reckon there is potential to realise a further 18p a share on the sale of the Faberge business and that a good sale of Faberge by Pallinghurst might effectively pay for the majority of its acquisition of the cash generative mining business,” the analysts added.

Source : Mining Weekly

Zambia said to near mine company stake sale to Israeli investor

JOHANNESBURG – Zambia, Africa’s second-biggest copper producer, is close to selling a stake in ZCCM Investments Holdings, a State controlled mine holding company, for more than $100-million, according to three people familiar with the matter.

Sapir Capital, an Israeli private equity company that’s invested in industries from nanotechnology to oil and gas, is waiting for final government approval for the acquisition of the 17.25% stake directly held by the government, said two of the people who asked not to be identified as the information has not been made public. A minority shareholder group welcomed Sapir’s investment, without giving further detail.

ZCCM-IH, which has minority stakes in the local units of companies including Vedanta Resources, First Quantum Minerals and Glencore, wasn’t immediately able to comment. Including its direct stake government owns 77.5% of the Lusaka-based company, including a 60.28% shareholding through the Industrial Development Corporation, of which President Edgar Lungu is chairperson. Lungu’s spokesperson wouldn’t immediately comment. The State pension fund also holds 15% of the company with the rest held by minority shareholders.

FAILED ATTEMPT
Zambia tried and failed to sell its direct stake in ZCCM-IH to local investors in 2015. If the deal goes ahead, Sapir will become the biggest shareholder after the government, which will retain its interest through the IDC.

The proceeds could help the government narrow its budget deficit as the state seeks an aid package from the International Monetary Fund. ZCCM-IH’s market capitalisation of about 6.1-billion kwacha ($655-million) is significantly less than the value of its assets, according to some minority shareholders.

ANGLO MINES NATIONALISED
“The investment of Sapir Capital is a show of confidence in the Zambian economy and the potential we all see in ZCCM-IH,” Philippe Bibard, a spokesperson for a minority shareholder group based in France, said in an emailed statement on Monday, without providing details of the deal.  “We look forward to having a good working relationship with Sapir Capital as a fellow shareholder.”

ZCCM-IH was formed to hold the government’s residual stakes in mines after they were privatised in the 1990s. The industry had been established and developed by Anglo American before its nationalisation in 1971.

Source : Mining Weekly

AfDB welcomes Zambia, Ghana to bond index

The African Development Bank (AfDB) has added Zambia and Ghana to its African Bond Index (ABI), expanding the index to the eight most liquid sovereign bond markets in Africa.

The ABI provides investors with a tool with which to measure and track the performance of Africa’s bond markets.

The composite index now comprises South Africa, Egypt, Nigeria, Kenya, Botswana and Namibia local currency sovereign indices, with Ghana and Zambia joining this month.

“More African countries are increasingly looking to domestic capital markets to source much-needed financing for economic development. We expect to include more countries to [the ABI] as soon as reliable pricing information is made available,” said AfDB financial sector development director Stefan Nalletamby.

The ABI is managed in collaboration with the African Financial Markets Initiative, which works to deepen the continent’s local currency bond markets, while creating an environment where African countries can access financing at variable terms.

Meanwhile, in December, the AfDB approved the creation of the first African multijurisdictional fixed-income enhanced exchange-traded fund – the African Domestic Bond Fund (ADBF) – which will track the performance of the ABI. The ADBF is expected to be launched in September.

Source : Engineering News

Lacklustre mineral laws costing Zambia dearly

Lusaka – Zambia, like other countries endowed with mineral resources, is losing an estimated US$1 trillion in revenue annually due to investors harbouring corrupt deeds.

This is contrary to the resolution made by Southern African Development Community (SADC) recently calling upon all 15 member states, endowed with vast mineral resources to promote equal share of proceeds (beneficiation) with the investors they harbour.

According to Zambia Extractive Industry Transparency Initiative (EITI), the country’s quest to be world leader in copper production is being frustrated by some unscrupulous company owners using Zambia’s laxity in mining laws to exploit the country.

And they are involved in acts of corruption and illegal deals, resulting in the country losing an average US$1 trillion annual in unsecured revenue.

Zambia is presently ranked seventh among the top 10 copper producers globally and is competing with other countries including Chile and China.

But the shortcomings in legislations laws to keep in check those flouting the law are costing the country dearly, the EITI says in its report.

The 51-member EITI findings show that Zambia the situation is compounded by delays to review the Mines And Minerals Act and compel the mining companies that have invested in the country to disclose who are the rightful owners.

This lacklustre in legislations has resulted in some illegal and corrupt deals including transfer pricing of the minerals mined in the country.

The findings suggest that there is need to review legislation or the country may probably lose more in revenue given the latitude extended to mine owners.

An urgent review of the Mines and Minerals Act if expedited EITI said will ensure beneficial owners of such companies are identified and will assist in curbing the vice that is not only rife in Zambia but rampant in many mineral extractive countries.

Siforiano Banda, the head of EITI at a recent stakeholders meeting noted that there is need to review the law and curb the practices that were ‘robbing’ the country of much needed revenue.

“The lack of access to beneficial ownership information of key players in the extractive industry by law enforcement and other competent authorities is a significant impediment,” Banda says.

He said this lack of vital information, made it impossible for authorities not knowing or being able to trace some of the dubious activities.

“There is need to empower the relevant authorities and assist them to identify the actual owners of the companies or indeed the persons who are responsible for such activities for onward action,” he said.

Financial institutions that are essential in the fight include banks, which have the information of actual beneficial owners and can assist prevent the misuse of corporate vehicles in the financial system.

Many countries, including Zambia, face various challenges when implementing measures to enable the availability of accurate beneficial information.

These are in addition to legal owner of the corporate vehicle as it is not collected and sufficiently verified at the time the corporate vehicle or crime is committed or at any stage throughout its existence.

“This frustrates the efforts of law enforcement and other competent authorities to follow the money in financial investigations that involve corporate vehicles.” Banda added.

SADC Heads of States at their annual summit held in Victoria Falls in 2014 resolved that member states needed to devise laws that ensure mineral beneficiation to bolster domestic economies.

 

Source – The Southern Times