An overview of Zambia’s mining sector

AN OVERVIEW OF ZAMBIA’S MINING SECTOR

ZAMBIA – FINLAND BUSINESS FORUM

MONDAY 1ST JUNE 2015

SOLWEZI

“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.

TYPICAL PRODUCTION PROFILE

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

DirectEmployment

Zambia2012

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

8

EMPLOYMENT STATUS

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

9

EXPATRIATE RATIO

10Source: ZAMBIA CHAMBER OF MINES.

MOPANI *KONKOLA KANSANSHI LUMWANA CHIBULUMA LUBAMBE NFCA0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Female Employees

Total Direct Employees

DIR

EC

T E

MP

LO

Y-

EE

S

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

12

MAJOR INVESTMENT PROJECTS 2000 TO DATE (US$12.4BN)

MOPANI KONKOLA LUBAMBE FQM LUMWANA KANSANSHI

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

13

COPPER PRODUCTION

COPPER PRODUCTION

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

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

0%

200%

400%

600%

800%

1000%

1200%

1400%

1600%

Private ownership National ownership Private ownership

Share of global production (Percentage)

Copper production (Tonnes)

15

ANALYSES OF THE OVERALL CONTRIBUTIONS TO GOVERNMENT REVENUE

16Source: Zambia Extractive Industries Transparency Initiative (ZEITI), Ministry of Mines, Energy and Water Development.

2008 2009 2010 2011 2012 20130

1

2

3

4

5

6

7

8

9

10Mining Company Payments

Government Receipts

ZM

W B

IL-

LIO

N

Government Rev-

enue from the ex-

tractive sector has

been increasing and

almost doubled be-

tween 2010 and

2011

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

GOVERNMENT REVENUE FROM THE EXTRACTIVE SECTOR HAS BEEN INCREASING

17

2008 2009 2010 2011 2012 2013 -

500

1,000

1,500

2,000

2,500

3,000

3,500

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.

ZMW

MIL

LIO

N

18

CORPORATE INCOME TAX CONTRIBUTIONS PER MINING COMPANY

2008 2009 2010 2011 2012 20130

500

1000

1500

2000

2500

3000

3500

Lumwana

Chambishi Metals

Mopani

Konkola

NFCA

Chibuluma

Kansanshi

ZMW

MIL

LIO

N


19

2008 2009 2010 2011 2012 20130

10

20

30

40

50

60

70

80

90

100PROPERTY RATES AND ANNUAL BUSINESS FEES

PROPERTY RATES AND ANNUAL BUSINESS FEES

CONTRIBUTIONS ARE MADE TO LOCAL COUNCILSZM

W M

ILLI

ON



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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.

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INDIVIDUAL CASE EXAMPLES

22

MOPANI COPPER MINES SUB-NATIONAL PAYMENTS

2008 2009 2010 2011 2012 20130

2

4

6

8

10

12

14KITWE/MUFULIRA COUNCILS

KITWE/MUFULIRA COUNCILS

ZMW

MIL

LIO

N


23

KONKOLA COPPER MINES SUB-NATIONAL PAYMENTS

2008 2009 2010 2011 2012 20130

5

10

15

20

25

KITWE/CHINGOLA/CHILILABOMBWE COUNCILS

KITWE/CHINGOLA/CHILILABOMBWE COUNCILS

ZMW

MIL

LIO

N


24

KANSANSHI MINING PLC SUB-NATIONAL PAYMENTS

2008 2009 2010 2011 2012 20130

2

4

6

8

10

12

SOLWEZI MUNICIPAL COUNCIL

SOLWEZI MUNICIPAL COUNCIL

ZMW

MIL

LIO

N


25

LUMWANA MINING CO SUB-NATIONAL PAYMENTS

2008 2009 2010 2011 2012 20130

2

4

6

8

10

12

14

16

18SOLWEZI MUNICIPAL COUNCIL

SOLWEZI MUNIC-IPAL COUNCIL

ZMW

MIL

LIO

N


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CHIBULUMA MINES SUB-NATIONAL PAYMENTS

2008 2009 2010 2011 2012 20130

200

400

600

800

1000

KALULUSHI/LUFWANYAMA COUNCILS

KALULUSHI/LUFWANYAMA COU...

ZMW

TH

OU

SAN

DS


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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]

Date post:	26-Jul-2015
Category:	Business
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An overview of Zambia’s mining sector

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