KCM problems too complex

KCM problems too complex

There is a problem at KCM; a big one that requires an urgent and comprehensive solution. The problem has many dimensions: investment, social, legal, political and technical. I have spoken to a few friends with extensive experience and expertise in mining, including at KCM. The message is loud and clear that KCM is very sick and requires a cure. We are however, not agreed on the type of cure and the method of administering the medication. For this reason, I would refrain from commenting on the merits or demerits of the route taken by government, through ZCCM IH, to commence proceedings of Liquidation, albeit Business Rescue, pursuant to the provisions of the Corporate Insolvency Act. Time will tell whether this was the best option.

Nonetheless, I can comment on the technical aspects of KCM. The company is supposed to be the crown jewel of Zambia’s mining industry as it sits on the ore-body with the best grade of Cu in Zambia. However, KCM under Vedanta has failed the Zambian people by failing to do basics:

1. _Mine Dewatering_- The processes of pumping water from the mines have been severely neglected as Vedanta has refused to invest into equipment and systems for effective dewatering in order to make the areas accessible for mining operations. This sabotage will render the Zambian mines redundant unless urgent and drastic measures are taken without delay

2. _Development of Reserves_ – Mining is not jackpot. Profits never come overnight. Geological exploration and development of reserves preceed extraction. That is not being done by KCM, opting to buy concentrates from DR Congo and treating at Nchanga Smelter. This has not only killed mining but disrupted stakeholders along the value chain that supports mining (suppliers, subcontractors…). This has damaged the economy of the Copperbelt as many suppliers of goods and services have had to close. The few that did jobs sometime back have not been paid by KCM, leading to bankruptcy and vulnerability before bailiffs and lenders. Most of these companies have laid off employees.

3. _Lack of Maintenance and Capitalization_ – KCM is not spending any money on procurement or maintenance of Plant and Equipment. This has led to low availability and reliability of machinery, consequently affecting production. The absence of adequate ore, coupled with unreliable equipment, has led to a situation where all Plants (Concentrator, Smelter, Refinery) are operating far below nameplate capacities. Mobile Equipment (Drill Rigs, Loaders, Haul Trucks…) are also affected albeit broken down because KCM has not been paying the firms subcontracted to provide these equipment and mining services

4. _Konkola Deep Project-_ – The future of KCM was premised on the successful completion and operation of two major projects: Konkola Deep Mining Project (KDMP) and Nchanga Smelter. This was on the cards, even when Anglo was around. Unfortunately, KDMP is incomplete and NChanga Smelter has never been ramped up to nameplate capacity, in part due to shortage of feed, besides a myriad of other technology and operational problems. KDMP is incomplete because KCM has not invested in the second phase of the project to link the shaft to the ore body. The preference for importing concentrates has been affected by GRZ’ s position to impose custom duty on imports.

5. _Lack of Skills Transfer_ – KCM has kept a lot of foreigners, especially Indians, in their establishment to do jobs that can be done by Zambians. Further, many Indians regularly come in as Consultants for simple tasks. The purpose is to inflate costs through payroll gymnastics . The consequence of this is that Zambians are not developing to perform senior roles.

Vedanta bought KCM at a very low price. They promised massive investments that would culminate in production volumes of 200,000 tonnes of Cu per year and a profitable operation that would contribute to Zambia. The result however, is that KCM is not mining even a quarter of what they promised; their mines are flooding; equipment is in ruins; subcontractors have gone bunkrupty; employees are not paid on time and paid meager salaries; Indians are feasting and externalising our money. And they are declaring consistent loses for the past 18 years, thus not paying tax to GRZ. In his book, Andrew Sardanis described Levy Mwanawasa’s sale of KCM to Vedanta as the _blunder of the century_ . Indeed, we blundered. Before us is _opportunity of the century_ to correct the blunder and reconfigure KCM to be a mine in Zambia that shall benefit Zambians.

May I hasten to conclude by advising that the capital and technical interventions required are complex and expensive. GRZ, albeit ZCCM IH is not the entity to operate the new KCM. Let’s find a partner!

If there is any lessons we have learnt from the failures in Zambian mining, it’s that we should not sell mines to traders (Vedanta) and we should not allow government to run mines (ZCCM). Let’s draw lessons learnt from the past and make decisions that will make the future of Zambian mining a bright one.

Just thinking aloud…

Author: Anonymous

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