Maravi

KCM cuts down on workforce

COMMENT - What an utter waste of resources. The government allowed the mining companies to just expand and expand, and they justified not taxing them because they would not build new projects. Better to have one bird in the hand, than ten in the sky, as the saying goes. They should have taxed the mines and invested in agriculture and infrastructure.

KCM cuts down on workforce
Written by Kabanda Chulu and Chiwoyu Sinyangwe
Saturday, December 27, 2008 1:12:02 PM

SOME copper mining investments were largely driven by the windfall prices and not to establish long-term developments, University of Zambia (UNZA) School of Mines dean Stephens Kambani has observed.

And Konkola Copper Mines (KCM) has confirmed it is downsizing its workforce in line with declining international copper prices, but says the country’s largest copper miner will not suspend any of the expansion projects as it is on course to producing the targeted 5,000 tonnes of finished copper by 2010.

Commenting on the challenges facing the mining industry due to declining copper and cobalt prices, Dr Kambani said there was need to consider several factors when designing, constructing or buying a mine.

“When investing in the mining sector, special consideration should be given to long-term planning and factors like designing, constructing or buying a mine should be taken into consideration and also investors should outline how to operate effectively at normal prices but some investors in the mining sector were just driven to Zambia because of the windfall prices but prices cannot be sustained at that level,” Dr Kambani said.

He explained that current prices at below US $ 4,000 per metric tonne were historically good because efficient companies could still operate profitably.

“The windfalls resulted in some companies to apply high costs of production because they were able to afford it but companies like KCM and Mopani had projected to operate effectively at a price of US $ 3,000 per metric tonne hence they are somehow okay and the windfall was just like a bonus,” Dr Kambani said. “And historically, the current price is good because we have been operating like this for many years, maybe there are some under currents resulting in the mines to take these decisions but also it is not feasible to form cartels in the copper mining industry.”

He said the decision to place Luanshya Copper mines under care and maintenance meant that government would lose out and there was very little it could do about it.

“Investors cannot keep their money when there is uncertainties especially about price issues and government is equally concerned because if there is no production, the mine will not pay royalties and other tax obligations and it is difficult for government because this is a free market economy and these are private business decisions being taken as a result of market failures,” said Dr Kambani. “Also in the mining industry, whenever there is a windfall, measures should have been put in place to establish a stabilisation fund which could have been helpful at this time.”

Luanshya Copper Mine was last week put on care and maintenance because the owners have claimed that current copper prices at less than US $ 4,000 per tonne were not profitable, hence over 1,600 miners had been declared redundant.

And KCM communications manager Sam Equamo stated that the mine had continued to review its operations with a priority of improving on production and productivity and examining areas where it could cut costs.

Last week, Mine Workers Union of Zambia (MUZ) disclosed that it had received notices that KCM would prune about 800 employees as part of the cost-cutting measures the mine was putting in place to deal with the plummeting copper prices.

“KCM is reviewing its operations in order to improve on production and productivity and examining areas where it can cut costs,” Equamo stated in response to a press query. “Some of these are in stores and materials purchasing, value engineering, adopting more cost efficient methods of operations, reduction in energy usage etc. Restructuring is an ongoing exercise.”

And Equamo, who stated that KCM was fully committed to the completion of its major projects, also disclosed that the US $400 million Konkola Deep Mining Project (KDMP) was on schedule and the first phase of the New Konkola Concentrator was undergoing commissioning.

KDMP is the second largest single investment in Zambian mining which will extend Konkola’s mine life to 2035.

“KCM remains geared to achieve its goal of producing 500,000 tonnes of finished copper per annum by the year 2010 when the KDMP will come on stream,” stated Equamo. “ Konkola Copper Mines is fully committed to the completion of its major projects. The Nchanga Smelter, along with the New Sulphuric Acid Plant, has been completed and is running. The Konkola Deep Mining Project is on schedule and the first phase of the New Konkola Concentrator is undergoing commissioning. These projects will help KCM reduce costs because they use state-of-the-art technology and therefore are more efficient.

Labels: JOBLOSSES, KCM, STEPHENS KAMBANI

posted by MrK @ 1:12 PM