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Copper production in Zambia could rise by about 4 percent this year.
For the past three years, Zambia’s copper output has been disrupted by a dispute over power prices. Mine operators, which consume more than half the country’s electricity, have been locked in battle with the government over a tariff increase.
But as negotiations reach their end, higher copper output in the country may be coming. Zambia’s copper production could rise by about 4 percent this year to reach a new record, according to the Chamber of Mines.
Nathan Chishimba, president of the government body, sees production rising to about 800,000 MT. Talks have been ongoing with most miners in the country; they rejected a tariff hike that the government imposed in 2014, and did so again at the start of 2016.
“There could be one or two sticking points but I’m not sure if those will be show-stoppers,” Chishimba said. “I can confidently say that we hope to see resolution in the next few weeks.”
In March, Zesco, which produces almost all of Zambia’s power, agreed to cut charges for mine operators, while suggesting that they be raised by half for other customers. But the government proposed introducing a flat tariff of 9.3 cents per kilowatt hour (kWh) backdated to January for mining companies, instead of individually negotiated rates that have averaged 6 cents per kWh.
“We have concluded [meetings] with all the mining houses except for one. They have accepted our proposal to actually pay 9.33 cents/kwh,” Felix Mutati, Zambia’s finance minister, told Reuters last month. An agreement to backdate tariffs to January has not yet been reached.
Overall, the government wants to recoup costs while ensuring copper producers are profitable, Minister of Mines and Minerals Development Christopher Yaluma said on Tuesday (June 6). His forecast for copper production is higher than Chishimba’s — he estimates that the country’s output could increase by 10 percent to hit 850,000 MT this year.
Major mining companies including Glencore (LSE:GLEN), Vedanta Resources (LSE:VED), First Quantum Minerals (TSX:FM,LSE:FQM) and Barrick Gold (TSX:ABX,NYSE:ABX) have operations in Zambia, which is Africa’s second-largest copper producer.
Production from First Quantum’s Sentinel operation will account for much of the nation’s increase, and should top a previous record of about 790,000 tons in 2013, Yaluma said.
“[Also] there has been a lot of investment in new shafts by underground mines such as Mopani, Chambishi and KCM. These projects will change the face of mining when they become fully operational,” he added.
On Tuesday, LME copper ended down 0.2 percent, at $5,616 a tonne, having hit a two-and-a-half week low of $5,553 on worries over Chinese and US growth, as well as geopolitical risks.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
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