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Zambia’s new president worries miners

September 26, 2011 Comments off

“Mining companies are waiting anxiously as Michael Sata, Zambia’s new president, settles into office, wary that the former opposition leader may put past threats against foreign investors into practice now that he has been elected. Rupiah Banda, the incumbent president’s gracious acceptance of defeat in last week’s vote paves the way for a democratic transition, still something of a rarity in Africa.

But it has also triggered unease among investors in Africa’s biggest copper producer. Any mining policy changes would affect a host of international companies – including Glencore, First Quantum, Barrick Gold and Vale – which were expected to invest billions of dollars in the sector over the next five years. The jitters are caused partly because Mr Sata, 74, and his Patriotic Front are relatively unknown quantities. Mr Sata has gained a reputation for populist attacks against investors and complaints that Zambia’s resource wealth has not been adequately distributed.”

Source: Financial Times, September 25 2011

Observations:

  • Some of the largest mining operations and prospects in Zambia are Barrick/Equinox’ Lumwana copper projects; Metorex Chibulama copper mine; Vale’s Konkola north copper project; CNMM Muliashi copper mine; and Collum coal mine.
  • Tensions against foreign, and especially Chinese, ownership of mines rose after two Chinese mine managers allegedly shot a group of protesting miners at Collum coal mine last year.

Implications:

  • It is likely that the new government will try to increase taxes to make the state benefit more from high copper prices. Additionally regulation of working conditions might be strengthened, as much of the unrest in the country’s sector was driven by dissatisfaction about labor rights.

©2011 | Wilfred Visser | thebusinessofmining.com

Peru cancels Southern Copper’s Tia Maria Project

April 15, 2011 1 comment

“Peru has canceled the controversial Tia Maria project owned by Southern Copper Corp., a mining ministry spokeswoman said Friday. The spokeswoman said the project was ruled “unacceptable” by the ministry, which is in charge of giving approvals for mining projects.

The cancellation was announced at a brief televised press conference of regional and national government representatives following the deaths this week of three anti-Tia Maria protesters. ‘We want to return to normal,’ said Peruvian Minister for Energy and Mining Pedro Sanchez, who refused to answer further questions. A spokesman for Southern Copper Peru said the company had no immediate comment.

The Tia Maria mine project, which was seen producing 120,000 tons of copper a year, had been dogged by a series of protests from residents fearing it would damage their water and environment.”

Source: Wall Street Journal, April 8 2011

Observations:

  • Southern Copper, part of Grupo Mexico, is one of the world’s largest copper miners, but is largely unknown by many people in the industry. The company has operations in Mexico and Peru and exploration projects in Chile.
  • The 120 thousand ton/year Tia Maria project should have increased expected 630 thousand ton production in 2011 to 700 thousand ton/year in 2012. Approx. 3/4 of the company revenue comes from copper.

Implications:

  • Southern Copper will need to submit a new environmental study to prove the mine will not contaminate groundwater. Public opinion in Southern Peru has turned against the company and led to large protests.
  • The intervention by Peru’s government might have impact on other development projects in the country. Furthermore, a potential increase of mining taxes is one of the key debates in the presidential election. Miners in Peru will have to be more aware of the social and political operating environment in the coming years.

©2011 | Wilfred Visser | thebusinessofmining.com

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