Mining sector overview lusaka

1. AN OVERVIEW OF ZAMBIA’S MINING SECTOR
ZAMBIA – FINLAND BUSINESS FORUM
THURSDAY 4TH JUNE 2015
LUSAKA
“Giving back to Zambia”
1
Mr. SHULA JALASI SHULA – Economist, Zambia Chamber of Mines/Zambia
EITI Council

2. 2
THE NATURE OF MINING

3. KEY POINTS TO NOTE:
A. INVESTMENT:
1. Mine development takes many years to achieve; an average of
about 10 years from Exploration to start of Mine Production.
2. Huge upfront investment is required to undertake mining. It
takes about 5 to 15 years to recoup the investment into the
operations, depending on the metal being mined and scale of
operations.
3. Mining is for the strong hearted, high risk takers with high
levels of perseverance and not for faint hearted.
4. It requires long term investment mind-set. The investment runs
from hundreds of USD millions to billions.
B. CURRENT STATUS OF ZAMBIAN MINING INDUSTRY:
 Copperbelt Mines – Old, Mature and Mainly Underground & labour Intensive,
structural factors and legacy issues rendering them high cost
 New Mines – e.g Northwestern Province – New frontier, mainly open pits which
are highly mechanised.

4. 2yrs -20yrs
1 2 3 4
1 Mine Exploration - 7-10 years
2 Mine Development- 5-10 years
3 Mine Operation 2-20 years
4 Mine Closure 2-10 years
7-10yrs 5yrs -10yrs 2yrs -10yrs
Production
Time

5. 5
ZAMBIA’S MINING PROFILE

6. OVERVIEW: MACROECONOMIC CONTRIBUTIONS OF MINING
Foreign Direct Investment
Exports
Government Revenue
Gross Domestic
Product
Direct
Employment
Zambia
2012
Typical share in
low and middle
income mineral-
driven countries
86% 60 – 90%
80% 30 – 60%
>25% 3 – 20%
>10% 3 – 10%
1.7% 1%
>
>
>
>
Source: ICMM MPD Toolkit analysis
>
6

7. 7
EMPLOYMENT

8. DIRECT EMPLOYEES CONTRACTED LABOUR OTHER(specify)
MOPANI 10,000 10,000
KONKOLA 7,000 9,000
LUMWANA 1,882 2,054
KANSANSHI 4,781 3,731
5407 (on the expansion
projects)
ALBIDON 63(due to care and maintenance of mine)
LUBAMBE 1,200 1,000
CHIBULUMA 602 345
CHAMBISHI METALS 741 147
CHAMBISHI COPPER
SMELTER 1,600 400
NFCA 1,064 1,219
TOTAL 28,870 27,896 5407
GRAND TOTAL 62,173
8

9. 9
EXPATRIATE RATIO

10. 10Source: ZAMBIA CHAMBER OF MINES.
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
MOPANI *KONKOLA KANSANSHI LUMWANA CHIBULUMA LUBAMBE NFCA
Female
Employees
DIRECTEMPLOYEES
7.9 8.3
%
9.0
%
11
%
10
%
7.1
%
4.7
%
ZAMBIA’S MINING AND GENDER PROFILE AS AT MARCH 2015
– A SAMPLE OF SEVEN LARGE MINES
*KONKOLA COPPER MINES is an industry average as the actual number could not be obtained in time for the study tour.
However, the percentage of female employees is 10%

11. 11
FOREIGN DIRECT INVESTMENT

12. MOPANI KONKOLA LUBAMBE FQM LUMWANA KANSANSHI
US$ 2.24BN US$ 2.9BN US$ 0.49BN US$ 2.23BN US$ 2BN US$ 2.54BN
12

13. 13
SOCIAL INVESTMENTS

14. 0
500
1 000
1 500
2 000
2 500
Goods Services
Mining industry procurement
(2012 data extrapolated from sample; US$ million)
Zambian
producedImports
bought from
Zambian
companies
Direct
imports
Imports
bought from
Zambian
companies

15. (2012 data from Lumwana, Kansanshi, Mopani and Konkola)

16. 16
2014 CSR EXPENDITURE
51,22%
28,08%
14,94%
4,92%
0,48% 0,35%
ZMW 322 MILLION - 6 OPERATIONS
Mopani
Konkola
Kansanshi
Lumwana
Chambishi Copper Smelter
Chibuluma

17. 17
COPPER PRODUCTION

18. COPPER PRODUCTION
Source: International Council on Mining and Metals 2012 (Enhancing the Contribution of
the Zambian Mining Sector to the Economy and Society) from 1963 - 2011 and Zambia
Chamber of Mines onwards
0%
2%
4%
6%
8%
10%
12%
14%
16%
-
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014
Private ownership National ownership Private ownership
Share of global production (Percentage)Copper production (Tonnes)

19. 19
ANALYSES OF THE OVERALL CONTRIBUTIONS TO
GOVERNMENT REVENUE

20. 20
Source: Zambia Extractive Industries Transparency Initiative (ZEITI), Ministry of Mines, Energy and Water Development.
0
1
2
3
4
5
6
7
8
9
10
2008 2009 2010 2011 2012 2013
Mining Company Payments
Government Receipts
ZMWBILLION
Government
Revenue from the
extractive sector has
been increasing and
almost doubled
between 2010 and
2011
*Note: all figures are in ZMW and encompass the overall extractive sector
GOVERNMENT REVENUE FROM THE EXTRACTIVE SECTOR HAS BEEN
INCREASING

21. 21
-
500
1 000
1 500
2 000
2 500
3 000
3 500
2008 2009 2010 2011 2012 2013
MINERAL ROYALTY TAX
CORPORATE INCOME TAX
MINERAL ROYALTY AND CORPORATE INCOME TAX CONTRIBUTIONS
HAVE INCREASED
*Note: all figures are in ZMW and encompass the overall extractive sector
Source: Zambia Extractive Industries Transparency Initiative (ZEITI), Ministry of Mines, Energy and Water Development.
ZMWMILLION

22. 22
CORPORATE INCOME TAX CONTRIBUTIONS PER MINING COMPANY
0
500
1000
1500
2000
2500
3000
3500
2008 2009 2010 2011 2012 2013
Lumwana
Chambishi Metals
Mopani
Konkola
NFCA
Chibuluma
Kansanshi
ZMWMILLION
Source: Zambia Extractive Industries Transparency Initiative (ZEITI), Ministry of Mines, Energy and Water Development.

23. 23
0
10
20
30
40
50
60
70
80
90
100
2008 2009 2010 2011 2012 2013
PROPERTY RATES AND ANNUAL BUSINESS FEES
PROPERTY RATES AND
ANNUAL BUSINESS FEES
CONTRIBUTIONS ARE MADE TO LOCAL COUNCILSZMWMILLION
*Note: all figures are in ZMW and encompass the overall extractive sector
Source: Zambia Extractive Industries Transparency Initiative (ZEITI), Ministry of Mines, Energy and Water Development.

24. 24
INCREASES IN MINERAL ROYALTY AND CORPORATE INCOME TAX
PAYMENTS BY MINING COMPANIES
• Mineral Royalty contributions have increased due to upward adjustments of
the royalty rate as well as increased production volumes from mining
companies owing to increased investment into exploration and expansion
projects under previous fiscal regimes.
• Over 5 mining companies have been consistently contributing to Corporate
Tax.
• Profitability in the mining sector as a whole has been impacted mainly by
different cost profiles resulting from structural factors and legacy issues in
different operations. Zambia’s mining industry is not homogenous.
• Payments to local councils have increased as a result of mining projects
commencing in new districts in addition to the expansion of projects in old
mining towns.

25. 25
INDIVIDUAL CASE EXAMPLES

26. 26
MOPANI COPPER MINES SUB-NATIONAL PAYMENTS
0
2
4
6
8
10
12
14
2008 2009 2010 2011 2012 2013
KITWE/MUFULIRA COUNCILS
KITWE/MUFULIRA
COUNCILS
ZMWMILLION
Source: Zambia Extractive Industries Transparency Initiative (ZEITI), Ministry of Mines, Energy and Water Development.

27. 27
KONKOLA COPPER MINES SUB-NATIONAL PAYMENTS
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013
KITWE/CHINGOLA/CHILILABOMBWE COUNCILS
KITWE/CHINGOLA/CHI
LILABOMBWE
COUNCILS
ZMWMILLION
Source: Zambia Extractive Industries Transparency Initiative (ZEITI), Ministry of Mines, Energy and Water Development.

28. 28
KANSANSHI MINING PLC SUB-NATIONAL PAYMENTS
0
2
4
6
8
10
12
2008 2009 2010 2011 2012 2013
SOLWEZI MUNICIPAL COUNCIL
SOLWEZI MUNICIPAL
COUNCIL
ZMWMILLION
Source: Zambia Extractive Industries Transparency Initiative (ZEITI), Ministry of Mines, Energy and Water Development.

29. 29
LUMWANA MINING CO SUB-NATIONAL PAYMENTS
0
2
4
6
8
10
12
14
16
18
2008 2009 2010 2011 2012 2013
SOLWEZI MUNICIPAL COUNCIL
SOLWEZI
MUNICIPAL
COUNCIL
ZMWMILLION
Source: Zambia Extractive Industries Transparency Initiative (ZEITI), Ministry of Mines, Energy and Water Development.

30. 30
CHIBULUMA MINES SUB-NATIONAL PAYMENTS
0
200
400
600
800
1000
2008 2009 2010 2011 2012 2013
KALULUSHI/LUFWANYAMA COUNCILS
KALULUSHI/LUFWAN…
ZMWTHOUSANDS
Source: Zambia Extractive Industries Transparency Initiative (ZEITI), Ministry of Mines, Energy and Water Development.

31. 31
For further information
please contact:
Maureen Jangulo Dlamini – Chief Executive Officer
jangulom@mines.org.zm
Shula Jalasi-Shula - Economist
sshula@mines.org.zm
Talent Ng’andwe – Communications Manager
ngandwet@mines.org.zm