Maravi

900 workers at Mopani Copper Mines face bleak future

900 workers at Mopani Copper Mines face bleak future
Written by Mutuna Chanda in Kitwe
Wednesday, March 04, 2009 8:30:44 PM

THE future of over 9,000 Mopani Copper Mines workers lies in limbo as the company considers a management position to close its Mufulira mine and placing four other shafts in Kitwe under care and maintenance.

And mines minister Maxwell Mwale has said he is aware of Mopani’s intention to close the Mufulira mine and placing its other operations under care and maintenance but warned that government would not tolerate this.

In a December 2008 analysis of the future of mine shafts presented to the shareholders of the mine, Mopani management recommended closing the Mufulira Mine and placing its four shafts on care and maintenance until the rebound of copper prices to profitable levels.

Mopani stated that the Mufulira mine was a high cost operation which was at the end of its economic life given the then market price.

According to well placed sources in Mopani, the analysis was also presented to the committee of ministers that toured the Copperbelt last December comprising mines minister Maxwell Mwale and labour minister Austin Liato as well to President Rupiah Banda during his working holiday in Mfuwe.

The mining firm stated that the copper prices rendered the mines at Nkana unprofitable for the foreseeable future.

The analysis acknowledged that the Nkana shafts all had payable reserves which could be mined in future.

It also recommended the restructuring of operations at Nkana to reduce costs.

It blamed most of the mines high production expenditure on the costs of doing business in the country.

The principal driver in most of the mines high unit costs of production has been the underlying costs of doing business in Zambia and inflation, read the analysis obtained by The Post. The following environmental factors have influenced costs over the period under review: undue reliance on road transport versus rail transport impacting all goods not manufactured in the country and resulting in very high freight costs; high cost and unreliable supply of electricity; high fuel costs in Zambia; poor operator and maintenance skills brought about by a lack of vocational education facilities in the country; a high inflation rate which compounded over the five years approximates 220 per cent; poor manufacturing infrastructure resulting in higher than necessary imports of goods such as mill balls, steel support, lime coal etc.

It further attributed the high cost of production to cost increases influenced by both domestic and international factors.

ÒThe industry has suffered the following specific cost increases either as a result of global factors or local factors: labour inflation of 396 per cent. This has a marked flow on effect on contractor costs and outsourced work and maintenance; fuels, coal and coke inflation of 353 per cent; lime inflation-303 per cent- brought about mainly by monopolistic behaviour of the local supplier; building cement inflation 233 per cent, again, brought about mainly by monopolistic behaviour of the local supplier,Ó it stated.

It illustrated that over a period of five years, between 2004 and 2009, both the volume and grade of copper at the Mufulira mine had been declining.

ÒAs ore has become less accessible, the expenditure has increased by 100 per cent over a period of five years,Ó it stated. ÒThe 2009 costs of production are not sustainable in the long-term since they include substantial reductions in primary and secondary development to minimize cash flows. It is self evident that with costs of mining at US $3,000 per tonne before processing, the mining operation is not viable.Ó

It stated that the option of care and maintenance for the Mufulira mine was considered but that it was seen as not viable.

ÒCosts of care and maintenance were forecast to be in excess of US $20 million per year and management considered that this option was not viable given the short mine life. It is apparent that Mufulira has been running at a loss for several years of a full cost absorption basis. With current copper prices (December) in the low US $3,000 the operation needs to be closed,Ó it stated.

For the Nkana operation, it stated that over a five-year period, between 2004 and 2009, both the volume and grade of copper in the SOB (South Ore Body) had been fluctuating.

ÒThe 2009 budget figure which indicates an increase has been drawn up to optimize cash flows rather than extending the life of the mine,Ó it stated. ÒThe increase in operating costs has been the principal driver in the increase in unit costs. Unit costs projected for next year (2009) whilst lower than previous years are almost equivalent to selling prices and make no contribution to processing or fixed costs. Costs for 2009 are not sustainable as they exclude the necessary primary and secondary development expenditure required during normal operating times, the option of care and maintenance is recommended for this shaft. Future reserves of 125,000 tonnes of copper may become payable when copper prices improve from the current level of US $3,100.Ó

It detailed the mining environment under which the Mufulira and Nkana shafts operated.

ÒMufulira and Nkana shafts are all very old and current operations are characterised by the following factors: operations are now at the fringes of the ore bodies; grades are lower, operations are further from the shafts, tramming distances are much greater,Ó according to Mopani management.

ÒThe levels which are being mined are extremely deep by world standards. At the depth, the dewatering of mines is a fixed cost and is an extremely expensive operation accounting for up to US $900 per tonne of operational costs (depending on the shaft and the ore volumes). These factors contribute to the high costs of operations.Ó

For the Mopani central shaft, it observed that the grade of the minerals had been in decline and that in 2009 it had been projected to increase to optimise cash flows rather than extending the life of the mine.

ÒAt this grade the mine is very marginal and unless significant cost reductions or cobalt credits are available which is unlikely, the life of this shaft is limited,Ó it observed.

It recommended care and maintenance for central shaft and that further work on restructuring the mine would be necessary if it was ever to reopen.

For Mindolo sub-vertical shaft, Mopani stated that the mine had substantial reserve at a payable grade but that the mine was marginal at the then prices.

It was also recommended for care and maintenance.

ÒThis shaft has been profitable up until 2008 but at current prices, it is not viable,Ó it stated.

Mindolo North shaft was also recommended for care and maintenance.

When contacted for comment over a week ago, Mopani chief executive officer Emmanuel Mutati said the analysis was an internal document.

ÒThat paper was an internal document,Ó Mutati said.

He, however, said he was not aware if the position of the board was to close the mine and place it under care and maintenance.

Labels: JOBLOSSES, MCM, MINING

posted by MrK @ 8:31 PM