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Reeling from the worst crisis it has faced this century, and losing millions of dollars a month in a depressed copper-price environment, the Zambia mining industry will push for a long-term strategic consensus to promote the growth not just of the mining industry, but of the entire country.
“As an industry, we carry the weight of an entire nation on our shoulders in terms of investment, jobs and foreign exchange earnings,” Chamber of Mines President, Nathan Chishimba said while speaking at a media conference in Lusaka in December.
Since 2000, on the back of rising copper demand from China, the Zambian copper mining industry has led the nation’s development, spurring GDP growth and helping to achieve annual growth rates of 7% to 10%.
The industry has ploughed more than US$10 billion into new mining ventures, trebled the country’s annual mining output to around 800 000 t and increased employment fourfold to more than 80 000. This mining growth has been key in taking government tax revenue from less than half a billion Kwacha in 2000 to a peak of K8 billion ten years later.
“We are the basket which holds all the proverbial eggs. Working together we have to create a high-growth, diversified economy which spreads risk and opportunities across the economy, creates more jobs and widens the tax base,” said Chishimba. “As we are seeing in the current crisis, Zambia should not be relying only on mining for its future.”
As a measure of the industry’s unity of purpose, the Zambian Chamber of Mines media conference was attended by senior executives of First Quantum Minerals(FQM), Konkola Copper Mines (KCM), Mopani and Barrick Lumwana and other senior industry figures. These are Zambia’s four largest copper mining companies, accounting for around 70% of the country’s annual output.
The objective, according to Chishimba, was to provide context and understanding for the slump facing Zambian and global copper miners after a reduction in demand in the past five years from China, the world’s largest consumer of copper (45% of world production).
It has led to a five-year slide in the copper price, which is around 60% off its 2011 peak – triggering production cutbacks and layoffs in all of the world’s major copper-mining nations, from Zambia, Congo and Chile to Australia, Canada and the United States.
The conference also heard that the Zambian mining industry faced specific local constraints such as a debilitating power shortage that has reduced production capacity, increased costs and, in certain cases, forced the closure of operations, with the loss of many jobs.
“We suffer from both production challenges, such as old mines, deep ore bodies, low grades, low productivity, and regulatory challenges – for example, a constantly changing policy and tax environment. The effect is twofold: our copper is expensive to produce, and investors are reluctant to start new mines or expand existing ones.”
On the long-term prospects for the global mining industry, Chishimba said there had always been demand for copper on the back of industrialisation and modernisation of the world economy, and nothing suggests that this is about to change. However, for Zambia to benefit from that continued demand, the Zambian mining industry needs to become more competitive.
“There are new, low cost mines coming on stream in other countries that can thrive in this low price environment. Unless Zambia takes action now to address our challenges, so that we can compete with these other countries, our future as a copper producing nation is in peril,” he said.
Chishimba said the challenge is for both the industry and the country to learn the lessons of the past and present.
“This national crisis poses long-term questions over Zambia’s economic development, which cannot be avoided. We all need to come together and agree the conditions which best promote the growth both of the mines and the broader economy. As an industry, we are ready to create dialogue on this vital strategic issue on which the future of our nation depends.”
Chishimba concluded by saying that the Chamber of Mines, with the full weight of support of its members, would engage with stakeholders on this topic in the coming year. It is the industry’s intention to host an ‘All Zambia’ conference next year, as part of the drive to reach long-term consensus on economic diversification.
Posted by: Laura Cornish
http://www.miningreview.com/zambia-mining-industry-must-resolve-challenges-to-promote-economic-growth/
