High costs are costing Zambian mines money

By Brenda Zulu
The high cost structure of many Zambian mines means they are losing money, and finding it hard to complete in the global marketplace, says Nathan Chishimba, president of the Chamber of Mines.

Speaking to the media in Lusaka on today, he explains that many mines are producing copper at $5 000-$7 000 per tonne, which is higher than the current copper price of around $4 600 per tonne. The difference represents the loss made on each tonne of copper sold. This can run into millions of dollars a month, depending on each mine’s monthly production figures.

Important reasons for the Zambian industry’s high operating costs, particularly for the older mines on the Copperbelt, are that they are deep ore bodies, which means the copper is harder to find. He added that they are also low grades, which means you get less copper from each tonne of ore mined.

Low productivity, which means you have to do more work overall to produce a tonne of finished copper; and erratic power supply, which makes it difficult to keep operations running efficiently and safely.

In addition, regulatory and policy issues affect the mines high rates of royalty tax, based on turnover, which has to be paid irrespective of whether the mine is making money;  and changing policy regimes, which make it hard for mines to plan for the long term, and deter investors from starting new mines or expanding existing ones.

Chishimba says: “This issue is critical because many mining companies in other parts of the world can produce copper with lower costs, raising the risk of higher-cost producers being squeezed out of the market.”