MINING companies in Zambia face the prospect of being put under care and maintenance amidst the escalating high-cost of operations, combined with continued uncertainty, triggered by declining copper prices, says the Zambia Chamber of Mines.
In an interview, Chamber president Goodwell Mateyo predicted a difficult period for mining companies for rest of this year owing to low copper prices on the international market.
He said low copper prices and the spread COVID-19 would cripple the mining sector, forcing some operations to be placed under care and maintenance.
He, therefore, called on government to provide mining companies a stimulus package as a means of alleviating some of the high operating costs of operations if mining companies were going to remain viable.
Copper prices on the international market have continued plummeting to around US $4,700 per tonne, amidst dampened demand for the red metal from China, the world’s top consumer, as the effects of the virus continue taking its toll on industrial activity.
This compares to over US $6,300 per tonne two months ago before the virus outbreak effects spiralled out of control.
“No one understands when this is will be over and when we get back to the state of normality. I think when the dust settles, the price will rise up quickly, but when that is no one really knows. Therefore, because of that uncertainty, it puts most of our operations…because the mines are fairly high cost operations so surviving in a low cost environment is extremely difficult and a lot of operators would be running out of cash,” Mateyo said.
He predicted that most entities and operations that were not viable will eventually be placed on care and maintenance.
“And above that, most of our investors, who have shares listed on the stock exchange, have lost significant market capitalization with a drop in those prices and in their shareholdings. What I foresee happening is that a lot of entities are going to really rationalize their operations and employ their capital where they think that it can be used more effectively. A lot of projects will get deferred, operations that are not very viable will be placed on care and maintenance,” he observed.
Mateyo, who is also Mopani Copper Mines’ senior legal officer, applauded the measures announced by Finance Minister Dr Bwalya Ng’andu last Friday, but added that more needed to be done to preserve mining industries.
“It is going to be a difficult next couple of months. The measures that the Minister announced I think they are a good start, but I think that a lot more might need to be done to preserve mining industries and operations from where I am standing. The measures announced are a good start, but I think the government needs to do a bit more in terms of stimulus in helping mining operators survive this tide,” Mateyo said.
He also expressed optimism that Zesco Limited and Copperbelt Energy Corporation (CEC) Plc would reach a resolution over the Bulk Supply Agreement (BSA), which lapsed, Tuesday.
“We are quite optimistic that the two parties will come to resolution and finalize at the very least an interim agreement to this period,” said Mateyo.