Zambian Mines Contribute 80% to FQM’s 2018 Copper Production

The Kansanshi and Kalumbila-Trident copper mines in Zambia were highly profitable in 2018, generating about US$3 billion in revenue.

The Canadian-based First Quantum Minerals (FQM) group, which operates both mines, produced a total of 606,000 tonnes of copper that year, with the Zambian-based operations contributing about 80% of the total output.

FQM president Clive Newell reported that the group had recorded a 6% increase in copper production compared to 2017, with Kansanshi contributing 252,000 tonnes and Kalumbila-Trident contributing 224,000 tonnes. Together, the two Zambian mines produced 476,000 tonnes of copper in 2018.

FQM invested approximately US$1.3 billion in capital expenditures in 2018 to develop its Cobre Panama project, which aims to diversify the company’s copper production. However, the new mine is projected to produce a maximum of only 175,000 tonnes of copper in 2019.

FQM anticipates producing between 700,000 to 735,000 tonnes of copper in 2019, with the two Zambian operations expected to contribute around 76% of the group’s total output, equivalent to about 560,000 tonnes.

This represents an 18% increase in copper production from Zambia compared to 2018, demonstrating confidence in the country’s mining industry and its production capabilities.

Newell had noted that the Zambian government had yet to advise on the Goods and Sales Tax (GST) rate, which was expected to come into effect on April 1, 2019. The impact of the GST, which replaced the Value Added Tax (VAT), had not been factored into the projections, perhaps indicating that FQM expected to negotiate exemption.

Using the London Metal Exchange’s average three-month copper price of US$6,123 per tonne, FQM generated revenues of around US$2.9 billion from copper alone in 2018, contributing about 74% of the group’s overall revenue. The Zambian mines were previously exempt from VAT, which resulted in a net claim for the mines, but the GST could impact their profitability.

Recently, the Zambian government revised its mineral royalty tax band rates for copper mining companies, increasing them by 1.5% and introducing a new tier that would impose a mineral royalty tax rate of 10% when copper prices surpass US$7,500 per tonne on the LME. The new tax bands for mineral royalty on copper produced in Zambia for 2019 are: 5.5% if international copper prices are less than US$4,500 per tonne, 6.5% for prices between US$4,500 and US$6,000, 7.5% for prices between US$6,000 and US$7,500, and 10% for prices greater than US$7,500.