The outburst by ailing dictator Michael Sata threatening to revoke the KCM mining license is nothing but a clear case of his total lack of understanding on mine operations, sources have told the Watchdog.
Insiders say the mining giant is totally broke because they have been surviving on borrowed money and now the loans are due for repayments.
“What happened is KCM has borrowed heavily to develop Konkola dip mining project. But from the way things are, the company can only realise something after possibly two years of mine development because they are still very far from reaching the copper ore. And they possibly need to inject another US$ 2 billion in equipment which they don’t have as they have to borrow again. But they cannot risk keeping workers on borrowed money especially that even after reaching the copper ore, the profit margins will be very low because of the low copper prices and high operational costs due to electricity increases under the PF government,” Sources said.
Highly placed sources say KCM has actually been failing to even pay statutory obligations to the Zambian government such as taxes to the Zambian government because they are totally broke and cannot borrow money for salaries.
According to insiders, the decision by KCM has nothing to do with the revoked Statutory Instrument number (SI) 89 as alluded to by president Sata. In fact, ordinarily, it is KCM that should benefit from the revocation of SI 89 because they are the ones that have the copper smelter that should be hired by other mining firms to process copper concentrates.
“But the problem again is that when copper concentrates are brought to KCM from other mining companies, KCM is paid according to the amount of recoveries. For example, First Quantum can bring say 1000 tonnes of copper concentrates for smelting and only maybe only 5 to 10 tonnes will be copper recoveries. So First Quantum will only pay for the 5 to 10 tonnes that would have been recovered. But this amounts to a huge loss to KCM because them would have used a lot of very expensive electricity to process 1000 tonnes only to be paid for 5 tonnes recovered. So is does not make any business sense,” sources have disclosed.
So in terms of jobs, those are going with or without tantrums from Mr. Sata and actually more people have already lost their jobs from Zambian mining contractors whose contracts have been cancelled or put on hold.
“If the issue is not handled with a sober mind and not the Kaponya style like Sata is doing, Kitwe, Chingola, and most of the Copperbelt towns will be ghost towns like Kabwe soon,” sources said.