Zambian government seeks a better mining deal

Published by MAC on 2013-02-11
Source: Bloomberg

Zambian investor asks Glencore, Vedanta units for higher dividends

Bloomberg

6 February 2013

Zambian subsidiaries of Vedanta Resources Plc and Glencore International Plc are among companies that should pay higher dividends to minority shareholder ZCCM Investment Holdings Plc, the state-controlled investor said.

ZCCM, 88 percent-owned by the Zambian government, also wants to negotiate increased stakes in local mines and has yet to start talks with companies on this, Chief Executive Officer Mukela Muyunda said in an interview in Lusaka.

"Clearly, it is a matter that keeps coming up regarding the level of shareholding that we should have," Muyanda said. "It is something that we will have to deal with at some point."

Zambia, Africa's biggest copper producer, privatized its mining industry between 1996 and 2001, maintaining minority stakes ranging from 10 percent to 21 percent in the companies, which it holds through ZCCM. The degree to which the country benefits from its copper resources has become a point of political contention, with the government accusing mining companies of avoiding as much as $2 billion a year in tax.

ZCCM wants the companies in which it has shareholdings to alter their dividend policies to improve transparency and increase payouts, Muyunda said in the Jan. 31 interview. He said dividends are the last priority for some companies, and this "doesn't work for us."

Maamba Collieries

While ZCCM will focus on buying stakes of as much as 35 percent in new mining projects, such as Nava Bharat Pte Ltd.'s Maamba Collieries, it also wants to boost ownership of existing operations, Muyunda said. Any increase would have to come through negotiations, he said.

Representatives of Mopani Copper Mines Plc, which is 90 percent owned by Glencore, and Eurasian Natural Resources Corp., which owns 90 percent of Chambishi Metals Plc, declined to comment.

Konkola Copper Mines Plc, 79 percent owned by London-listed Vedanta, and First Quantum Minerals Ltd., the majority owner of the Kansanshi mine, didn't immediately respond to e-mails seeking comment.

"Government has no intention of any compulsory acquisition, because that is going backward," Finance Minister Alexander Chikwanda said in an interview today.

Private shareholders own about 12 percent of ZCCM, which is traded on the Lusaka Stock Exchange as well as the NYSE Euronext Paris. The Zambian government agreed to convert about $425 million ZCCM owes it into equity through a rights issue, the company said on Dec. 12.

"The intention is for it to happen before the end of June," Muyunda said.

--Editors: John Viljoen, Amanda Jordan

 

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Zambia's mine law change will be investor-friendly

Franz Wild

Bloomberg

6 February 2013

Zambia probably will approve this year an amendment to its mining law, which will be beneficial to companies operating in Africa's biggest copper producer, Mines Minister Yamfwa Mukanga said.

The changed Mines and Minerals Act will allow for longer licensing permits so investors "have the confidence that they will have security of tenure," he said in an interview in Cape Town today.

While the government wants the state to be involved in mining joint ventures, "we are not going to have a situation where we are going to move towards nationalization," he said. "We are trying to attract more investment in the country by reviewing the legal framework. We are not going to go backwards."

Glencore International Plc and First Quantum Minerals Ltd. are among international mining companies with operations in Zambia. The southern African nation's annual copper production is expected to reach 1.2 million metric tons by 2015 compared with 700,000 tons last year, Mukanga said.

There are no plans to introduce a so-called windfall tax on mining now, he said.

"It can't be completely off the table," Mukanga said. "For now it is off the table because we believe it has nothing to do with getting more revenue."

Zambia is trying to find a mechanism acceptable to mining companies that will ensure the government is paid dues from them, Mukanga said.

Export Levy

The government's decision on whether to waive a 10 percent export levy on metal concentrate, as requested by First Quantum, will be based on what's best for Zambia, Mukanga said.

"We will review the amount of smelting capacity we currently have in the country," Mukanga said. "If the amount of smelting capacity is such that it is underutilized, we'll say no. If it is fully utilized and we don't have excess capacity, then we'll say yes, export."

If the duty remains, the economics of First Quantum's Enterprise project, located in the northwest of the country, are "borderline," Tristan Pascall, an assistant general manager at the company, said on Jan. 25.

Zambia introduced the levy on the export of ore and concentrates in November 2011 as it sought to increase local value addition to mineral products.

Enterprise Operations

The Enterprise operation, which will be the only nickel producer in the country after Albidon Ltd. mothballed its Munali mine in December, will produce 38,000 tons of the stainless- steel raw material annually in its first phase, the company said on Dec. 12. Phase two could reach 60,000 tons yearly.

There are no nickel smelters in Zambia and the scale of the mine First Quantum is building doesn't justify constructing one, according to John Gladston, resource optimization manager for the Trident project, which incorporates the Sentinel and Enterprise mines.

First Quantum has a 60,000-ton stockpile of copper concentrate worth $100 million at its Kansanshi mine, about 10 kilometers (6 miles) north of Solwezi, according to Operations Director Matt Pascall.

Copper for delivery in three months retreated 0.4 percent to $8,238 a ton by 2:08 p.m. in Johannesburg, extending its decline this year to 3.1 percent.

--With assistance from Matthew Hill in Johannesburg. Editors: Ana Monteiro, Bryson Hull

To contact the reporter on this story: Franz Wild in Cape Town at fwild@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net