mining sector overview lusaka

AN OVERVIEW OF ZAMBIA’S MINING SECTOR

ZAMBIA – FINLAND BUSINESS FORUM

THURSDAY 4TH JUNE 2015

LUSAKA

“Giving back to Zambia”

1

Mr. SHULA JALASI SHULA – Economist, Zambia Chamber of Mines/Zambia

EITI Council

2

THE NATURE OF MINING

KEY POINTS TO NOTE:

A. INVESTMENT:

1. Mine development takes many years to achieve; an average of

about 10 years from Exploration to start of Mine Production.

2. Huge upfront investment is required to undertake mining. It

takes about 5 to 15 years to recoup the investment into the

operations, depending on the metal being mined and scale of

operations.

3. Mining is for the strong hearted, high risk takers with high

levels of perseverance and not for faint hearted.

4. It requires long term investment mind-set. The investment runs

from hundreds of USD millions to billions.

B. CURRENT STATUS OF ZAMBIAN MINING INDUSTRY:

Copperbelt Mines – Old, Mature and Mainly Underground & labour Intensive,

structural factors and legacy issues rendering them high cost

New Mines – e.g Northwestern Province – New frontier, mainly open pits which

are highly mechanised.

2yrs -20yrs

1 2 3 4

1 Mine Exploration - 7-10 years

2 Mine Development- 5-10 years

3 Mine Operation 2-20 years

4 Mine Closure 2-10 years

7-10yrs 5yrs -10yrs 2yrs -10yrs

Production

Time

5

ZAMBIA’S MINING PROFILE

OVERVIEW: MACROECONOMIC CONTRIBUTIONS OF MINING

Foreign Direct Investment

Exports

Government Revenue

Gross Domestic

Product

Direct

Employment

Zambia

2012

Typical share in

low and middle

income mineral-

driven countries

86% 60 – 90%

80% 30 – 60%

>25% 3 – 20%

>10% 3 – 10%

1.7% 1%

>

>

>

>

Source: ICMM MPD Toolkit analysis

>

6

7

EMPLOYMENT

DIRECT EMPLOYEES CONTRACTED LABOUR OTHER(specify)

MOPANI 10,000 10,000

KONKOLA 7,000 9,000

LUMWANA 1,882 2,054

KANSANSHI 4,781 3,731

5407 (on the expansion

projects)

ALBIDON 63(due to care and maintenance of mine)

LUBAMBE 1,200 1,000

CHIBULUMA 602 345

CHAMBISHI METALS 741 147

CHAMBISHI COPPER

SMELTER 1,600 400

NFCA 1,064 1,219

TOTAL 28,870 27,896 5407

GRAND TOTAL 62,173

8

9

EXPATRIATE RATIO

10Source: ZAMBIA CHAMBER OF MINES.

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

MOPANI *KONKOLA KANSANSHI LUMWANA CHIBULUMA LUBAMBE NFCA

FemaleEmployees

DIR

ECT

EMP

LOY

EES

7.9 8.3%

9.0%

11%

10%

7.1%

4.7%

ZAMBIA’S MINING AND GENDER PROFILE AS AT MARCH 2015 – A SAMPLE OF SEVEN LARGE MINES

*KONKOLA COPPER MINES is an industry average as the actual number could not be obtained in time for the study tour.

However, the percentage of female employees is 10%

11

FOREIGN DIRECT INVESTMENT

MOPANI KONKOLA LUBAMBE FQM LUMWANA KANSANSHI

US$ 2.24BN US$ 2.9BN US$ 0.49BN US$ 2.23BN US$ 2BN US$ 2.54BN

12

13

SOCIAL INVESTMENTS

0

500

1 000

1 500

2 000

2 500

Goods Services

Mining industry procurement

(2012 data extrapolated from sample; US$ million)

Zambian

producedImports

bought from

Zambian

companies

Direct

imports

Imports

bought from

Zambian

companies

(2012 data from Lumwana, Kansanshi, Mopani and Konkola)

16

2014 CSR EXPENDITURE

51,22%

28,08%

14,94%

4,92%

0,48% 0,35%

ZMW 322 MILLION - 6 OPERATIONS

Mopani

Konkola

Kansanshi

Lumwana

Chambishi Copper Smelter

Chibuluma

17

COPPER PRODUCTION

COPPER PRODUCTION

Source: International Council on Mining and Metals 2012 (Enhancing the Contribution ofthe Zambian Mining Sector to the Economy and Society) from 1963 - 2011 and ZambiaChamber of Mines onwards

0%

2%

4%

6%

8%

10%

12%

14%

16%

-

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

Private ownership National ownership Private ownership

Share of global production (Percentage)Copper production (Tonnes)

19

ANALYSES OF THE OVERALL CONTRIBUTIONS TO

GOVERNMENT REVENUE

20Source: Zambia Extractive Industries Transparency Initiative (ZEITI), Ministry of Mines, Energy and Water Development.

0

1

2

3

4

5

6

7

8

9

10

2008 2009 2010 2011 2012 2013

Mining Company Payments

Government Receipts

ZMW

BIL

LIO

N

Government

Revenue from the

extractive sector has

been increasing and

almost doubled

between 2010 and

2011

*Note: all figures are in ZMW and encompass the overall extractive sector

GOVERNMENT REVENUE FROM THE EXTRACTIVE SECTOR HAS BEEN

INCREASING

21

-

500

1 000

1 500

2 000

2 500

3 000

3 500

2008 2009 2010 2011 2012 2013

MINERAL ROYALTY TAX

CORPORATE INCOME TAX

MINERAL ROYALTY AND CORPORATE INCOME TAX CONTRIBUTIONS

HAVE INCREASED


Source: Zambia Extractive Industries Transparency Initiative (ZEITI), Ministry of Mines, Energy and Water Development.

ZM

W M

ILL

ION

22

CORPORATE INCOME TAX CONTRIBUTIONS PER MINING COMPANY

0

500

1000

1500

2000

2500

3000

3500

2008 2009 2010 2011 2012 2013

Lumwana

Chambishi Metals

Mopani

Konkola

NFCA

Chibuluma

Kansanshi

ZM

W M

ILL

ION


23

0

10

20

30

40

50

60

70

80

90

100

2008 2009 2010 2011 2012 2013

PROPERTY RATES AND ANNUAL BUSINESS FEES

PROPERTY RATES ANDANNUAL BUSINESS FEES

CONTRIBUTIONS ARE MADE TO LOCAL COUNCILSZ

MW

MIL

LIO

N



24

INCREASES IN MINERAL ROYALTY AND CORPORATE INCOME TAX

PAYMENTS BY MINING COMPANIES

• Mineral Royalty contributions have increased due to upward adjustments of

the royalty rate as well as increased production volumes from mining

companies owing to increased investment into exploration and expansion

projects under previous fiscal regimes.

• Over 5 mining companies have been consistently contributing to Corporate

Tax.

• Profitability in the mining sector as a whole has been impacted mainly by

different cost profiles resulting from structural factors and legacy issues in

different operations. Zambia’s mining industry is not homogenous.

• Payments to local councils have increased as a result of mining projects

commencing in new districts in addition to the expansion of projects in old

mining towns.

25

INDIVIDUAL CASE EXAMPLES

26

MOPANI COPPER MINES SUB-NATIONAL PAYMENTS

0

2

4

6

8

10

12

14

2008 2009 2010 2011 2012 2013

KITWE/MUFULIRA COUNCILS

KITWE/MUFULIRACOUNCILS

ZM

W M

ILL

ION


27

KONKOLA COPPER MINES SUB-NATIONAL PAYMENTS

0

5

10

15

20

25

2008 2009 2010 2011 2012 2013

KITWE/CHINGOLA/CHILILABOMBWE COUNCILS

KITWE/CHINGOLA/CHILILABOMBWECOUNCILS

ZM

W M

ILL

ION


28

KANSANSHI MINING PLC SUB-NATIONAL PAYMENTS

0

2

4

6

8

10

12

2008 2009 2010 2011 2012 2013

SOLWEZI MUNICIPAL COUNCIL

SOLWEZI MUNICIPALCOUNCIL

ZM

W M

ILL

ION


29

LUMWANA MINING CO SUB-NATIONAL PAYMENTS

0

2

4

6

8

10

12

14

16

18

2008 2009 2010 2011 2012 2013

SOLWEZI MUNICIPAL COUNCIL

SOLWEZIMUNICIPALCOUNCIL

ZM

W M

ILL

ION


30

CHIBULUMA MINES SUB-NATIONAL PAYMENTS

0

200

400

600

800

1000

2008 2009 2010 2011 2012 2013

KALULUSHI/LUFWANYAMA COUNCILS

KALULUSHI/LUFWAN…

ZM

W T

HO

US

AN

DS


31

For further information

please contact:

Maureen Jangulo Dlamini – Chief Executive Officer

[email protected]

Shula Jalasi-Shula - Economist

[email protected]

Talent Ng’andwe – Communications Manager

[email protected]

mining sector overview lusaka

Business

nature of mining

konkola copper mines

zambias mining profile

sample us

yrs production time

direct employees

copper production source

large mines