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Zambia Mining Report Q4 2010
Business Monitor International, Oct 2010, Pages: 57
Business Monitor International's Zambia Mining Report provides industry professionals and strategists, corporate analysts, mining associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Zambia's mining industry.
ARM and Vale launch new copper mine
In August 2010, African Rainbow Minerals (ARM) announced the start of construction on the new Konkola North copper mine in Zambia, in 50:50 partnership with Brazilian mining giant Vale via their Konnoco Zambia joint venture (JV). The US$380mn mine is due to commence full production by 2015, with the mine’s concentrator plant expected to be commissioned by end-2012.
ARM anticipates a mine line of 28 years, with annual output of 45,000 tonnes of contained copper in concentrate (from 2.5mn tonnes per annum—tpa—of ore). The two companies are also carrying out a three-year exploration programme in the area surrounding the mine site, which could potentially double mine ouput to around 100,000tpa, according to ARM. Zambia’s state-run ZCCM Investment Holdings also has a buy-in right to Konnoco Zambia, of either 15% or 20%. BMI has also commenced coverage of ARM in the Company Monitor section of this report.
At present, BMI holds a bullish view towards the Zambian copper sector. Our forecasts call for copper output to increase steadily over our forecast period, surpassing the 1mn mark by 2013. Looking at trends in 2010, copper production over the first half rose by 10.2% year-on-year (y-o-y), to reach 363,682 tonnes. The government is now targeting 740,000 tonnes for the full year, an assessment BMI shares.
Country Overview
Zambia has a vast amount of metals, gemstones, industrial minerals and potential energy resources, including coal, hydrocarbons and uranium. For several years, Zambia’s economy has been based on mining, primarily copper and cobalt. Globally, the country is the seventh largest producer of copper and second largest of cobalt. Major foreign investors in Zambia include Canadian miner First Quantum Minerals, UK-based Vedanta Resources, Australia’s Equinox Minerals and South Africa’s Metorex. Overall, Zambia is widely regarded as a low-risk investment destination and has attracted high levels of foreign investment in recent years.
Industry Forecast
We are optimistic on the outlook for the Zambian mining sector over our forecast period to 2014. We believe that production levels for the key commodities of copper and cobalt should continue to increase steadily, especially as smelters and mines recommence production after a period of closure in the wake of the global financial crisis. Zambia has also long been considered a stable investment destination, with good mining sector regulations. Our forecasts estimate an average annual growth rate of 6.4% for the Zambian mining sector over the forecast period to 2014.
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