Investing in African Mining: Zambia (Part I)

THIS POST WAS ORIGINALLY PUBLISHED DECEMBER 09, 2009

Investing in African Mining: Zambia (Part I)

Zambia is a country in southern Africa with a tropical climate with population over 12 million.
Zambia possesses a number of mineral resources, however, the major one that has been exploited for nearly a century, is copper. Copper is the dominant export commodity – in 2007 it was 71.1% of all exports. The country nevertheless has enormous reserves of gold, uranium, nickel, lead-zinc, iron, and manganese.
From the mining point of view the major climate seasons are – May-August cool/dry season and September-November hot/dry period. December-April brings heavy rains.
Generally speaking the mining history of Zambia may be divided into these three periods:
Phase 1 – 1960s - 1970s:

• High commodity prices
• Independent governments
• Process of nationalization of mines
• Good revenues from copper export with peak production in 1969 and Zambia was the world's 4th largest producer.

Phase 2 – beginning of 1970s- end of 1990s -- results of nationalization:

• Few and scarce investments in mining sector
• Run down of operational mines and the need for sizeable investments
• Absence of adequate national reserves for investment

Phase 3 – 2000 to 2008 – gradual recovery

• Attracted substantial amount of FDI
• New processing facilities and mines emerged
• Double increase of production
• International metal prices increased as well as demand from China and India
• Development of “junior” mines in the country

Present situation
2008 was a crucial year for the country – it was marked with introduction of new tax regime and mining law. In essence this was:
• Windfall tax - a sort of royalty payment;
• Variable tax – does not apply when windfall tax applies, but it will be an income tax  if payable;
• Concentrate export levy;
• Increased royalty.
All this resulted in a sharp decline of exploration and many projects were put on hold.
At the end of January 2009, the Government scrapped the windfall tax on minerals following complaints from foreign miners operating within the country. However, another news was very important this year: the Government intends to increase its shareholding in foreign-owned mining companies from a current level of 10% to 35%. However, it is still unknown when actually this happen. Detailed analysis of Zambia’s Tax Policy in presented in The Politics of Reforming Zambia’s Mining Tax Regime by SARW.
Copper and cobalt comprise the core of the Zambian mining sector. This map gives a general outline of deposits

Source: THE GEOLOGY AND MINERAL RESOURCE Kasempa Mining Ltd
In detail major mineral resources and general investments ideas are presented at INVESTMENT OPPORTUNITIES IN THE MINING INDUSTRY Web-site and the official Web-site of the Ministry of Mines and Minerals Development . And authoritative source on mining MBendi gives this chart of mining projects in the country.