Lights Out: Vedanta Suspends Nchanga Copper Operations

Vedanta’s (NSE:VEDL) Zambian operator has stopped operations at its second copper mine over import duties on vital supplies needed for processing.

In a note to employees seen by Reuters, Konkala Copper Mines (KCM) said that it would be suspending operations at the Nchanga mine beginning last Friday (January 4) because acid concentrate was not readily available for its smelter.

KCM, which is majority owned by Vedanta, pointed the finger squarely at the government for the suspension, saying “the introduction of 5 percent import duty on concentrates has made the smelting of imported concentrates commercially unviable.”

KCM said it has to import concentrates for its copper smelter to operate at full capacity. While Nchanga has not been shuttered completely, operations have been pared back due to slower smelter production.

The import duty on concentrates is just one of a suite of measures introduced by the Zambian government to tackle government debt.

The measures, which include new mining duties, increased royalties and plans to replace a value-added tax with a sales tax, have been drawing the ire of miners since they were announced last year.

Last week, the permanent secretary of the Ministry of Mines, Paul Chanda, told Reuters that miners operating in Zambia had been given the opportunity to show the government how the new taxes would affect them, but none had responses besides two companies that asked for more time.

So far the new laws have not generated positive relations with miners, who are a major part of the Zambian economy.

The government has so far threatened to expel foreign workers if international companies start laying off their workforces in response to the higher taxes — Canada’s First Quantum Minerals (TSX:FM) said shortly afterwards that it would be firing 2,500 workers anyway.

Vedanta’s news on the Nchanga mine makes it the second operator to start switching off the lights — though as recently as December 20, 2018, KCM was still spending money on improving infrastructure, with a $95,000 rail weighbridge commissioned.

KCM operates another two mines in the country: the Konkola copper mine (which is its flagship) and the Nampundwe pyrite mine.

Zambia is the seventh-largest copper-producing country in the world, and the second in Africa behind the Democratic Republic of Congo.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.