State questions mines’ sincerity

GOVERNMENT has questioned why mining companies are quick to effect what they term cost-saving measures even when the commodity prices are still above worst case scenarios which they had indicated in their business cases.
And Government has called on mining companies to diversify their operations by investing in power production to stabilise production in the industry.
Minister of Mines and Minerals Development Christopher Yaluma said there is inconsistency in the way mining companies behaved when they decided to shed off their workforce on account of low prices and that they were not able to sustain their businesses.
Mr Yaluma said this yesterday at the 2016 ‘Investing in African Mining’ conference in Cape Town, South Africa, where he is leading a Zambian delegation.
This is according to a statement issued by press secretary at the Zambian High Commission in South Africa, Nicky Shabolyo.
Mr Yaluma said most mining companies in Zambia had indicated in their business plans that the only times when operations would become unprofitable in Zambia would be when prices for commodities such as copper started trading at US$2,500 and below.
He questioned why companies in Zambia have rushed to retrench workers even when copper prices are currently going for over US$4,000 per tonne, which was way above the US$2,500 which the mining companies had put up as the worst case scenario which could trigger such measures.
“When copper prices were above US$9,000 per tonne, these companies made windfall profits. It is mind-boggling that they do not want to refer to these super profits when it comes to low commodity prices.
“One would expect that they should have made savings to cushion effects of bad times as what we are going through today, but you find that all of them have externalised these profits,” Mr Yaluma said.
Mr Yaluma also said mining companies should consider going into joint ventures with Zambians and invest in a mix of power sources.
“We need some serious energy mix and mining companies must play a clear role. It is regrettable that we allowed the investors to do away with power plants when they took over the mines because they saw a cheap source of power in Zesco.
“We should go back to the Zambia Consolidated Copper Mines days when all divisions had their own power sources. I raised these issues at the Ministerial Symposium and the mining companies present acknowledged,” he said.
Mr Yaluma said it could have been a lighter burden on Government had the mining sector shown willingness to support the proposal to take electricity tariffs to cost-reflective levels.
Zambia currently ranks among countries charging the lowest electricity tariffs on the continent, a situation Mr Yaluma said had made it difficult to attract private sector investment.
Currently, Zesco pays about 11 cents per kilowatt for electricity generated locally and about 19 cents per kilowatt for imported power. The utility company in turn sells this at about five cents to the mines.
Mr Yaluma said Government is working on normalising this as mandated by last year’s meeting of Southern African Development Community ministers of Energy, which resolved that all member states should attain cost-reflective tariffs by 2019.
He said this year’s mining indaba is taking place at a difficult time not only for Zambia but the African continent.
Mr Yaluma said it is, however, gratifying that the African Union, under the African Mining Vision, has directed countries to standardise instruments governing mining investment in all countries.
Mr Yaluma said Zambia’s challenges stemmed from factors over which Government has no control citing the low water levels that have reduced the country’s energy generation capacity.
He said this has consequently led to reduced low production in the mining and other key sectors of the country’s economy.

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