A Mining expert Philasoni Chikwanda has urged government to be thoughtful as it continues to dialogue with Glencore, the majority shareholders of Mopani Copper Mines – MCM following its decision to put the mines on care and maintenance.
Mopani Copper Mine was last week placed under care and maintenance by its parent company Glencore which resulted to sending an estimated 11, 000 workers on force leave. This decision was however objected by the Zambian government and in a statement seen by the Zambian Business Times – ZBT, Mopani has since temporarily rescinded its decision to put its copper mines under care and maintenance.
Chikwanda told the Zambian Business Times – ZBT in an exclusive interview that following the 90 days given to conclude the matter, government should reflect on the company’s cost of production relative to commodity prices considering the current low prices on the market.
He said given the current low copper prices on the market, the cost of operating a mine especially underground mining has gone up hence when the cost curve is low, operations automatically go down leading to a closure of mining activities or going under care and maintenance.
“These are issues that government has to interrogate carefully, the debate should revolve around the cost production for Mopani Copper Mines because decisions should also ensure that they benefit the company and help them survive especially in this current COVID – 19 situations,” He said
Meanwhile, Finance Minister Dr. Bwalya Nga’nda had on April 20, 2020 announced during a media briefing that projections suggest that the reduction in the price of copper on the London Metal Exchange – LME will continue until June resulting in a drop in mineral royalty and income tax payments from mining companies.
He said Pay as You Earn (PAYE) from the mining sector is also expected to fall as some contractors may lose their contracts going forward hence the scaling down of mining sector activities will lead to reduced engagement of foreign providers of management services and will affect Withholding tax receipts on management fees and consultancy.
Chikwanda has called on government to dialogue with other mining companies to find ways in which companies will survive amidst COVID – 19 and ensure aggressive measures are taken to alleviate this situation.
Analysts at ZBT have cautioned saying the rescinding of the decision by Glencore may just be meant to safeguard and hold on to the mining license and that any premature jubilation from the government or unions should be avoided. Copper prices are currently low and old underground mines cost of production is higher than open cast mines.
MCM and KCM are underground mines and their cost of production is much higher than say the open cast mines operated by First Quantum Minerals in Solwezi, hence you find that some copper mines are more profitable than others even if they are all mining copper.
The cost of production also determines the break even prices. The underground mines use up a lot more power and the price of electricity has been going up, open cast mines rely more on diesel to power their trucks and machinery while underground mines require more electricity to pump out water and keep underground operations going. So, their are some technical considerations beyond what the eye can see.
The statement from Mines Permanent Secretary Barnaby Mulenga was that the Mine has decided to give the 90 day notice. When you critically look at the implication of this, it’s more of saying they will proceed to place the mine on care and maintenance after 90 days (3 months), so the root problem still persists.
