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Zambia electricity price hike threatens mining output

LUSAKA – Zambia’s decision to increase electricity prices by almost 29% for mining companies is likely to hit operations in Africa’s second largest copper producer, the Chamber of Mines of Zambia said.

The bulk power supply agreement tariffs between state power company Zesco and Copperbelt Energy Corporation were increased this week to 6.84 c/KWh from 5.31 c/KWh.

“Mining companies will not be able to absorb this cost, especially the high cost producing companies. The tariff increase is not sustainable at all,” said the Chamber of Mines of Zambia, which represents the mining firms.

Copper exports account for more than 70% of Zambia’s foreign exchange earnings and mining is a major employer in the southern African country of over 13-million people.

A nearly 10% decline in copper prices this year have already hit mining companies operating in Zambia, which include First Quantum Minerals, Vedanta Resources Plc, Glencore Xstrata and Barick Gold Corp.

The companies declined to comment.

“The mines are operating just above the break-even point and we should be mindful that the tariff hike does not distort their cost structure,” said Noel Nkhoma, an analyst at the Economics Association of Zambia.

However, Christopher Mubemba, the director of generation and transmission at Zesco said the current tariffs that the mines were paying could not meet the power company’s costs.

“If we are able to improve our income we will be able to give the mines the power that they need and in good quality,” Mubemba told Reuters.

Source – Miningweekly