Zambia’s plan to dig its way out of debt with a copper revival

As of July, the pursuit of a premier copper reserve on a global scale guided a Silicon Valley startup to the doorstep of a once-mighty mining empire.

In the town of Chililabombwe, situated within Zambia’s Copperbelt province and near the border with the Democratic Republic of Congo, dignitaries observed with anticipation as a drilling rig penetrated deep into rock.

KoBold Metals, backed by formidable venture capitalists such as Breakthrough Energy Ventures with support from luminaries like Bill Gates and Jeff Bezos, embarked on a $150 million exploration venture with the potential to rejuvenate a nation’s economy through the discovery of sought-after high-quality metals.

“This is the essence of our endeavor,” stated Alex Matthews, KoBold’s Zambia Country Manager, as he pointed towards mineral samples extracted from the Mingomba deposit.

Utilizing advanced AI technology to optimize drill placement, this California-based startup aims to achieve what few can. The investment not only symbolizes a departure from traditional mining finance but also addresses the mounting demand for copper, a critical component in the global transition towards renewable energy sources. Zambia’s ambitious goal of revitalizing the Copperbelt region could soon come to fruition.

The Copper Conundrum: Navigating Challenges in Zambia’s Ambitious Copper Production Drive

Copper, a linchpin of Zambia’s economy, tax base, and growth, faces a pivotal moment in its history. Today, most of the country’s copper output originates from mines in the North-Western province, diverging from the erstwhile epicenter of the Copperbelt. After a sovereign default in 2020, ill-fated attempts at mine nationalization, and dwindling investments in mines under the previous administration, President Hakainde Hichilema seeks to triple Zambia’s copper production from 800,000 tonnes annually to over 3 million tonnes by 2032.

This monumental objective entails surpassing the production of neighboring countries, including Africa’s largest copper producer, the Democratic Republic of Congo.

Hichilema, a businessman elected in 2021, faces the dual challenge of enticing substantial investments for new exploration while also attracting investors willing to rejuvenate aging underground mines hampered by high power costs. “Every tonne matters,” he asserted in March.

Geography further adds to the complexity. Zambia possesses copper resources akin to the DRC’s Central African Copperbelt; however, transporting this copper over distances exceeding 1,800 km, mostly by truck, to distant ports like Namibia’s Walvis Bay or Tanzania’s Dar es Salaam poses logistical hurdles. Nonetheless, Zambia’s comparative political stability offers a distinct advantage.

Charting a New Course: Zambia’s Resurgence Plan for Copper

“Globally, the allure of the Central African Copperbelt’s geology is universally acknowledged,” stated Mfikeyi Makayi, the CEO of KoBold in Zambia and the first Zambian woman to lead a mineral exploration company.

While Zambia shares the Copperbelt’s abundant copper resources with the DRC, its lack of infrastructure upgrades to facilitate market access has impeded progress.

President Hichilema’s administration aspires to rectify this situation while simultaneously addressing its external debt restructuring negotiations.

Initiatives encompass the creation of a regional railway connection to Angola’s Lobito port, which would considerably reduce transportation times from the Copperbelt.

Additionally, the government has stabilized mining taxation, established a cross-border economic zone with the DRC to enhance copper value, and signed agreements to incorporate locally produced electric car batteries.

Yet, a pivotal challenge remains: rectifying the costly state takeovers of the Copperbelt’s prominent mines, Konkola and Mopani, executed between 2019 and 2021.

These efforts incurred significant losses, exemplified by Mopani’s $300 million loss in the previous year. Nonetheless, Hichilema’s advisor, Jito Kayumba, echoes the collective determination to rejuvenate the Copperbelt and stimulate regional transformation.

Nostalgia, Challenges, and Environmental Concerns: The Path to Copper Renaissance

Reflecting on Zambia’s earlier copper prominence, Theresa Mulenga, a homemaker, expresses confidence in meeting the government’s ambitious deadline for copper production expansion.

On the flip side, a pit worker named Daniel in Chingola, home to Konkola Copper Mines (KCM), articulates skepticism about achieving Hichilema’s objective.

The region’s prevailing financial challenges have negatively impacted working conditions and motivation. He articulates concerns about diminishing safety standards and deteriorating equipment quality.

Similar stories echo among KCM workers, revealing discontent over wages, job conditions, and resource scarcities. These realities underscore the complexity of Zambia’s copper resurgence narrative, where challenges intertwine with the benefits derived from the mining industry.

Zambia’s Uphill Battle: Overcoming Debt and Environmental Dilemmas

Reclaiming its status as a copper giant necessitates Zambia’s meticulous planning and debt management. The nation was the first African country to default on foreign debt during the pandemic.

While relief from official creditors has been secured, uncertainties linger. The specter of debt repayment looms, and the country’s strategy for managing its debt crisis remains pivotal.

Environmental concerns also cast a long shadow. Resident Margaret Waya describes hazardous emissions and acid mist from the smelter affecting her well-being and home’s integrity.

The government acknowledges these concerns, addressing them through initiatives aimed at bolstering environmental management and decentralizing safety standards monitoring.

Striking a Balance: A Multifaceted Approach to Mining Redevelopment

While Kankoyo, a Copperbelt settlement, illustrates the complexity of community versus mining industry dynamics, it also reflects intertwined fates.

Residences, plagued by industrial activities, are also beneficiaries of employment opportunities associated with mining. As mines undergo revitalization efforts, the need for a win-win solution emerges.

Proposed programs to relocate residents, funded by new investors, seek to mitigate environmental and health hazards while preserving economic opportunities.

The Path Forward: Harnessing Competitive Advantages for Zambia’s Copper Resurgence

In the journey towards copper renaissance, Zambia’s rich copper deposits emerge as a competitive advantage. Factors such as grade quality and extraction efficiency play pivotal roles in determining the economic viability of mining operations.

First Quantum’s Kansanshi mine, for example, maintains copper grades below 1 percent, aligning with global averages. In contrast, KoBold’s partnership with ZCCM-IH in the Mingomba deposit, boasting higher grade averages, underscores the potential of Zambia’s geological endowment.

Moreover, leveraging historical infrastructure and modern environmental standards distinguishes Zambia’s approach. The resurgence of the Ndola concentrator and the reprocessing of old copper dumps exemplify these efforts.

Ultimately, Zambia’s success hinges on reliability. Stability, consistency, and a favorable supply chain environment could prove decisive in cementing Zambia’s status as a key contributor to the global shift towards clean energy.

SOURCE:ft.com