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May 30, 2006
Nationalization and Privatization in Zambia's Copper Industry
I recently sneered at the internal forecasts of dramatically increased production at Venezuela's national oil company. The Economist recently looked at Zambia's copper industry, once nationalized and now privatized, and how production levels have changed. You already know the rest of the story, don't you?:
Back in the 1970s Zambia was consistently producing more than 700,000 tonnes of copper a year. By 2000 this had plunged to just 249,100 tonnes—the least since the 1950s. Years of mismanagement by the state, crumbling infrastructure and falling prices had taken their toll. But in 2000 Zambia decided to privatise its mines and in 2002 the copper price finally began to revive. From a low of $1,319 per tonne on average in 2001, copper prices have recently touched $8,800.
Selling Zambia Consolidated Copper Mines (ZCCM), the state-owned copper monopoly, was hardly a smooth affair. It took four years of negotiations and false starts before the assets were finally privatised in 2000. But in 2002, less than two years after bagging the country's main copper mines, Anglo American (in a spectacularly ill-timed move) decided to pull out, after copper prices hit rock bottom. In November 2004 Vedanta Resources, an Indian company listed in London, stepped in and purchased Konkola Copper Mines (KCM), which remains the country's largest producer.
The new owners have undertaken massive investments to upgrade and expand existing mines and processing plants and to develop new ones. Vedanta has embarked on $800m-worth of investment in projects. These are expected to take about four years to complete. The biggest chunk is for the development of the $400m Konkola Deep Project, which should more than double KCM's ore production and expand the mine's life from 2012 until 2035. A new mine is being developed by Australia's Equinox Minerals in Lumwana in the far west of the copper belt. Canada's First Quantum Minerals started production at the Kansanshi mine last year, while a Chinese state-owned company has invested in the Chambishi mine.
Zambia's production of copper recovered to about 427,000 tonnes in 2004. Fuel shortages and labour disputes hampered production last year—but it should now rebound strongly. By 2008 the country could extract over 900,000 tonnes of copper a year—if it can ensure that energy supplies and infrastructure become more reliable.
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