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Mopani was ill-prepared for global crisis, says CEO

Mopani was ill-prepared for global crisis, says CEO
Written by Mutuna Chanda in Kitwe
Saturday, May 30, 2009 3:35:45 PM

MOPANI Copper Mines chief executive officer Emmanuel Mutati has confessed that his firm was ill-repared to face the global economic downturn.

Speaking during a luncheon hosted by the Zambia Mining Exhibition (ZAMINEX) Show in Kitwe at the ongoing Copperbelt Mining, Agriculture and Commercial Show, Mutati described the time of economic downturn as having been terrible. The Show is being held under the theme 'Productivity in Adversity'.

"Last year and in particular the last six months proved to be a very difficult and challenging time for us at Mopani due to the global economic downturn," Mutati said. "The situation caught most of us ill-prepared."

He said Mopani had to review its operations to ensure that it survived.

"At Mopani, we have had to reach deep and review absolutely all aspects of our operations to ensure that there is indeed a way forward," he said. "The remedy for repositioning ourselves has not been easy medication for us to take. Regrettably some of our workmates lost their jobs and indeed quite a number of contractors lost sizeable investments as we tried to reposition the company in order to meet the challenges of the new economic order."

He described the experience of the global economic downturn as having been a wake-up call of huge proportion.

"A time that we need to acknowledge and analyse and be mindful of as we go forward; because for sure...this will not be the last recession," he said. "There have been two world recessions-1975 to 1977, 1982 to 1984 and a global supply constraints recession-1990 to 1992."

He conceded that copper prices were strong but that high production costs and investment had stood in the way of some underground mines being profitable.

"It is not debatable that the price of copper has been strong to the point of exceeding the highs of previous cycles," he said. "However from July last year it has since plummeted by almost 50 per cent. The recent reversal in prices still puts copper at very high levels by historical standards but higher costs and significant investments into capital equipment and plant have limited the ability of some underground mines to stay viable."

Mutati said that addressing the cost of doing business in Zambia should be the mining sector's point of engagement with the government.

"Mining depth and the increase in fuel and energy prices have raised the cost of production and supply to the markets particularly for landlocked countries such as Zambia," he said. "The issue is not just one of low copper prices but one of high costs too. Zambia is a high cost destination and consequently a high cost producer by global standards. I believe that reducing the cost of doing business in Zambia is top priority and this should be the platform for engagement with the mining sector."

And mines minister Maxwell Mwale urged mining companies to continue lowering production costs.

"It should be noted that the production cost denominator is a level of production," Mwale said. "Retrenchment of local employees should be last resort."

He also praised Mopani management for rescinding their decision to close the Mufulira mine and placing Nkana operations under care and maintenance.

"Government is happy that the company made a wise economic decision as the past few months have indicated that metal prices are rebounding," said Mwale. "This upward trend in metal prices is also good news for other mining companies especially Lumwana Mining Company and the Chambishi Copper Smelter whose operations were only recently commissioned."

Labels: MOPAM

posted by MrK @ 2:38 PM