SAIMM ZAMBIAN BRANCH TECHNICAL PRESENTATIONS

INTEGRATED MINING INDUSTRY DEVELOPMENT

DR SIXTUS C MULENGACHIEF EXECUTIVE OFFICER – TRANTER ZAMBIA LTD

CHAIRMAN - SAIMM ZAMBIA BRANCH

25 NOVEMBER 2009 CHINGOLA – ZAMBIA

INTEGRATED MINING INDUSTRY DEVELOPMENT – ZAMBIA

• Introduction• Mining industry in Zambia has historically been the engine

of national development and continues to be so. • Mining at large scale in Zambia dates back to the early

1900s, the main metals being copper, cobalt, lead and zinc.

• Zambia has a large potential for a diverse mineral resource base covering base metals, precious/semi-precious stones, industrial minerals, energy minerals, and recently the likelihood of oil presence.

• The country under its National Vision 2030 aspires to become a prosperous middle income nation. Mining sector is geared to make a significant contribution to achieving this goal

INVESTMENT IN MININING INDUSTRY AND PRODUCTION

• Copper production grew rapidly in the sixties and seventies when the mining industry was under private ownership and investment inflow was large.

• Production peaked at about 800,000 tonnes of Copper per annum in the seventies, making

• Zambia was among the top three world’s top producer of copper and cobalt in the sixtees and seventees.

• During the eighties when the mines were nationalized, the revenue from the mining industry was utilized mainly for national infrastructural development, consequently leaving little for re-capitalization.

• By late nineties, copper production had reduced to about 250,000 tonnes per annum.

• In the late 1990s to early 2000s, the mining industry was liberalized under a private-sector investment enabling environment. This has resulted in significant investment inflow into the sector amounting to about US$3 billion foreign Direct Investment from 2000 to 2007. Copper production has increased from a low of 250,000 tonnes in 1999 to over 500,000 tonnes of copper per annum in 2008. It is projected that copper production will reach 1,000,000 tonnes per annum by year 2012.

INVESTMENT IN MININING INDUSTRY AND PRODUCTION

• Furthermore, this new business-enabling environment has resulted in new mines being developed in provinces other than the Copperbelt. These are; First Quantum Minerals’s Kansanshi Mine and Equinox’s Lumwana Mine in Northwestern Province respectively and Albidon Ltd’s Munali Nickel Mine in Southern Province.

• Additionally, new projects have been implemented. Major ones being; the Konkola Deep Mining Project, the Mufulira Smelter, the Chambishi Copper Smelter, the Nchanga Copper Smelter and Acid Plant, the Changa satellite Open Pits, the Muliashi Mine development and the Mindola at depth Project.

COPPER PRODUCTION 1990 - 2006

0.00

200.00

400.00

600.00

800.00

1,000.00

1,200.00

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

CAPITAL INVESTMENT (US$ MILLION) 1990 - 2006

0

100

200

300

400

500

600

700

800

900

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

KEY FACTORS FOR INTEGRATED DEVELOPMENT OF MINING INDUSTRY

Zambia can achieve its National Vision 2030 through integrated mine development as this encapsulates the key aspects of sustainable development. The Key Pillars should be:

• GovernmentTo create an investor friendly, enabling environment and framework for achieving sustainable national economic development

• Local Investors

Local entrepreneurs should invest in mining industry so that they become anchors of long term growth of the industry.

• Foreign InvestorsThese are essential to have as they bring international players in the economy. They have large capacity for investment and technology transfer.

• Diversification of Mineral Base and Value-AddingEssential to provide the materials required for national growth and maximise returns on national mineral resource exploitation.

KEY FACTORS FOR INTEGRATED DEVELOPMENT OF MINING INDUSTRY

• Investment The country requires both foreign direct and domestic investment respectively. The country has a low domestic investment portfolio and hence the much needed drive to attract foreign direct investment (FDI). New investment will continue to come to Zambia as long as the country maintains globally competitive incentive regime. For example, the Zambia Development Agency (ZDA) incentive package has generated a significant flow of investment into the country to-date.

• Energy Energy is a lifeblood of any industry. In Zambia, mining industry is the major consumer of energy. To achieve the goals of integrated mine development, given the global ever souring oil prices as well as the energy deficits being experienced, the mining industry should be a major player in the development of alternative energy sources, such as coal and natural gas.

• Physical InfrastructureMining industry by necessity demands an elaborate infrastructural setting of transport network, power network, housing, telecoms, social services such as health and education, in order to operate efficiently. This infrastructure although initially developed for the mining industry becomes a catalyst for the development and growth of the local area and the nation at large.

KEY FACTORS FOR INTEGRATED DEVELOPMENT OF MINING INDUSTRY

In order to achieve sustainable development, the following conditions are essential:

• Political StabilityPeace and stability is essential for sustainable development, as it provides security of investment. Zambia has been a haven of peace in the region since it came to being.

• Enabling Policy and GovernanceAn enabling investment environment is essential for attracting foreign direct investment. Good governance with transparency energises the economy.

KEY FACTORS FOR INTEGRATED DEVELOPMENT OF MINING INDUSTRY

• Adequate Mineral Resource BaseNew mines can only be developed if economic minerals resources are identified. This requires huge investment in mineral exploration and an open and transparent system for allocation of exploration rights.

Mineral exploration being a high risk venture requires global competitive incentives to attract investment in the sector.

A new cadastral system has been established under the New Mines and Minerals Act which aims at promoting exploitation of diverse minerals other than soley depending on copper.

KEY FACTORS FOR INTEGRATED DEVELOPMENT OF MINING INDUSTRY

• Human ResourcesSustainable development can only be achieved if there is a solid base and an ever adaptive human resource base.

Mining industry being one of the major employers has a major role to play in the development of skills in the country, as exemplified by historical performance.

Over the years, the Zambian mining industry has contributed greatly to human resource development through mainly universities and higher learning institutions scholarships and on-the-job training programmes respectively.

CONCLUSION

• Mining industry in Zambia will continue to contribute to National Sustainable Economic Development given the investor- enabling environment that the government has created.

• Furthermore, experience worldwide has shown that participation of local entrepreneurs in investing in key sectors of an economy, has created a sustainable base for national economic development.

• Foreign investment is essential for growth and technology transfer for any country now that we all live in a Global village.

• Zambia should continue to improve conditions to attract both local and foreign investment in the mining industry.

• The unprecedented increase in mineral exploration activity is likely to bring about mineral diversity in the mining industry. The industry is booming as exemplified by the many mining development projects in progress and in the pipeline.

• The challenges include how these different facets of the economy are brought together to ensure the strength of each sector is fully exploited for the common good.

Zambia’s mining industry is on the right track and will be a great contributor to the achievement of the National Vision 2030. Zambia shall become a prosperous middle income nation.

THANK YOU