Zambia, Africa’s largest copper producer risks shutting down some of the mines or scaling down copper output with the revised 30% power hike by the country’s energy regulator, effective January 1st 2011.
According to mine experts, most underground mining projects might be forced to scale down their power consumption to cost save lay off some labour while others might be affected in production because of the new cost of electricity, endorsed by the Energy Regulation Board.
There was no immediate comment from Copperbelt Energy Corporation, the service provider to the mines on the Copper rich region of the country as its spokesperson and Copperbelt CEO Mr Neil Croucher’s phone went unanswered when contacted on August 12 for a comment. However, players in the mining and copper sector in Zambia raised eyebrows over the revised power costs endorsement by the energy regulator, expressing fears that it might affect the projected copper output especially underground mining that consumes more than surface operators.
On August 10 the Energy Regulation Board gave thumbs up over the 30% planned revision of electricity supplied to the mines in Zambia under the Bulk Power Supply Agreement undertaken between the state power utility and service provider, Copperbelt Energy Corporation, effective January 1st 2011. The players added that the endorsement of the electricity upping may lead to drastic copper output projections for the country, Expected to rise to more than 900,000 tonnes per annum effective this year and rise beyond 5 million in 2015 because of the adverse costs of energy.
According to players in the industry, most affected will be among others Konkola Copper Mines, China’s non Ferrous Metals Africa, Mopani Copper Mines that run underground operations in the country and require large volumes of water to dewater the working places where copper and other metals are extracted.
The key mining companies face a risk of either shutting down most operations to increase copper output as the cost of electricity will be now be prohibitive while others might lay off workers to remain afloat. The Chamber of mines, a formation of foreign mining companies operating in Zambia is concerned that the development might have higher reparations on Zambia’s anticipated copper output this year and beyond.
A source associated with underground mining said that the mines are still in their recovery stage for the investment they ploughed into the mines and have to pay back the loans from their financiers and the turn of events now means more operational costs.
Mr Frederick Bantubonse GM of Chamber of mines said his voice to the concerned players in the industry arguing that underground mines are likely to be adversely affected because they required more electricity to dewater pits and haul ores up to ground level. The decision will now be a cost on the mines especially those dealing with underground mining. One wonders what the criteria is with the increase. The decision by the regulator might affect future investments in the mining sector because the owners will fail to secure real returns from their investments.
The chamber wondered what would happen when the price of copper on the international market falls yet the tariffs for electricity remained higher. Zambia’s mining companies consume an average 50% of the electricity generated in Zambia, estimated at 1,400 MW per day which rises to 1,800 MW at peak periods.
The mines, through the service provider, Copperbelt Energy Corporation are in most cases prompted to turn to DR Congo for additional average of 140 MW of power to sustain mine operations when the state utility has problems including rationing and power generating machinery maintenance. Copper mines consume about 50 percent of Zambia’s generated power. In 2008, during the financial crisis and copper prices slumped, most mines either closed while others scaled down their labour to remain afloat.
According to the regulator the approval of the proposed 30 percent increase in tariffs is cost reflective measures to enable the state utility undertake rehabilitations to its ageing equipment which needs to meet demand from mines, domestic and industrial users.
According to data, Zesco and CEC, the key providers are likely to resume negotiations for further power hikes for 2012 to 2015 period a decision which prompted most industry players to seek an exemption of mines from such increases to boost Zambia’s metal production record. Zambia envisions its power generation capacity to rise to over 3,000 MW by 2016 to enable it export the surplus electricity to its neighbors. The country’s 1,400 MW to 1,800 MW consumed might rise sharply over the coming years unless countervailing initiatives are done.
The coming of new mining projects including First Quantum Minerals’ Trident mine and the Konkola deep come on stream, Zambia will need to raise its generation capacity to meet local and export demand. Zambia has embarked on various efforts to rise power generation including building USS 2 billion-750 MW plant at Kafue Gorge Lower by 2017 in addition to Kariba power station whose output is expected to be upgraded to 720 MW, from the current 540 MW.
Zambia’s largest distributor of power to the mines, Copperbelt Energy Corporation was also building power stations in some parts of the country to cushion the rising demand. Key consumers, Konkola Copper Mines a unit of London listed Vedanta Resources that plans to invest $1 billion in the next 3 to 4 years to become a major global copper producer. China’s non ferrous metals, operating Luanshya and Chambishi mines, need more power to meet operations at the Luanshya mine where a USD 400 million open cast mine is on stream in addition to the smelter at Chambishi with an investment of USD 250 million.
Mr Fan Wei deputy CEO of Chambishi Copper said that the company may plough in about USD 250 million into the smelter at Chambishi mine in Zambia to increase output to 250,000 per tonne. The expansion program is intended to be completed by next year to increase capacity from 150,000 tonnes to between 250,000 tonnes and 300,000 tonnes of blister copper using an ISA technology from Australia.
Chambishi Copper Smelter customers include among others, Lumwana Copper Mines, China Luanshya Mines, NFCA and Chibuluma mine. The company’s biggest challenge is the lack of a mine of its own in that 96% income is expended into mining companies with the remaining four percent is used for investment, salaries and other overheads.
According to the company’s assement, the USD 300 million state of the art Chinese operated smelter had intentions of increasing production of blister copper to 250,000 tonnes per annum from 150,000 tonnes currently produced.
(Filed by Mr Kapembwa Sinkamba SteelGuru Correspondent Zambia)