Mining to Zambia

(Last updated: 31 Jul 2007)

Trends and opportunities

The market

Zambia is the world's seventh largest producer of copper, generating 3.3 per cent of the Western world’s production, and world’s second largest producer of cobalt, generating 19.7 per cent of world production. It also has significant quantities of selenium (about 16.7t) and silver (about 8t) together with minor gold and platinum group elements, which are produced as important by-products of the copper mining and processing.

Zambia also possesses a variety of precious and semi-precious minerals such as amethyst, aquamarine, emeralds, gold and diamonds. Other known mineral resources which are largely under-exploited include marble and granite as well as ferrous metals.

Combined reserves and resources of copper-cobalt ore in operating mines of the Copperbelt are estimated to exceed two billion tonnes and these have mostly been delineated for exploitation. Many junior miners, including the Australian companies are active in mineral exploration in Zambia, particularly for copper and base metals.

The copper, lead and zinc ores are smelted and refined into metals prior to export. The precious metals plant in Ndola in the Copperbelt recovers bullion and other metals from the slurries. Cobalt is recovered through a leaching process. Copper metal fabrication into cables is an important industry in Zambia. Foundries produce mill balls from scrap iron while calcination of lime and cement production constitute important industrial mineral-related activities.

The growth of the gemstone mining sector has now led to the establishment of lapidaries, and Zambia Emerald Industries Ltd (ZEIL) is one of the largest emerald processing and cutting plants in the world. Other mineral-related industries include manufactures of explosives, glass, sulphuric acid, dry cells, fertiliser, paint, putty, bricks, tiles, ceramics, roofing sheets and pesticides. 

Privatisation and restructuring

The Government of Zambia has instituted fundamental regulatory, institutional and legislative frameworks to ensure sustainable growth of the private sector. The Investment Act of 1993 (amended April 1996) is the key piece of legislation for both foreign and domestic investors. In addition, the Privatisation Act, Export Development Act, Export Processing Zones Act and the Competition and Fair Trading Act are all important guarantors of an open operating environment. Mining companies that have been successfully privatised include Zambia Consolidated Copper Mines, and Ndola Lime Company, Maamba Collieries Limited and Kariba Minerals Limited are earmarked for privatisation in the near future.

Opportunities

• Konkola is deepening the underground mine and constructing a new acid plant at a cost of A$656 million.
• Nkana smelter at Konkola Copper Mine is being expanded to increase smelter capacity at a cost of A$164 million.
• The Konkola-Nchanga Expansion Project to prolong the life of the mine is under consideration.
• The Lumwana Project (Equinox) is being developed into the world’s biggest copper mine and is scheduled for commissioning by the second half of 2007, at a projected cost (for the first stage) of A$388 million.

Apart from the traditional mining activities in copper and cobalt the list of investment opportunities in this sector include precious metals such as gold, silver and selenium, the platinoid group including iron, tin, nickel and manganese, agro-minerals-rock phosphate and igneous phosphate suitable for conversion to fertiliser, peat, limestone, reclamation of copper from slug tailing dumps, gemstones, deposits of talc, fluorspar, graphite, barytes and clays, and energy resources of uranium, coal and hydrocarbons.

The Zambian Government provides incentives to companies wishing to invest in the mining sector, which include:

• Mineral royalty ranging from 0.6 per cent to 5 per cent of the gross value.
• Corporate tax has been reduced from 35 per cent to 25 per cent and the period of carry forward of mining losses has been extended from 10 to 20 years.
• Exemption from payment of customs duty on consumables and mineral royalty up to a cap of A$21 million in the first year and A$19.6 million) per year for the next four years thereafter.
• No payment of withholding tax on interest, dividends, royalties and management fees paid to shareholders and affiliates.
• Copper and cobalt price participation fees are tax deductible.
• No payment of excise duty on electricity consumed.
• The restriction of offsetting losses against profits, which is limited to 20 per cent for mines with a common owner that are not adjacent, has been removed so that 100 per cent of the losses can be offset.
• Duty-free importation of capital equipment and utility vehicles.

Competitive environment

Some of the key players in the Zambian mining industry are listed below:

Copper and cobalt:	Zambia Consolidated Copper Mines (Vedanta Resources UK),  Chambishi Metals plc (NFC China), Chibuluma Mines Plc. (Metorex Limited, South Africa), First Quantum Minerals Ltd (Canada), Equinox Minerals (Australia), Luanshya Copper Mines Plc (Zambia)
Copper and cobalt exploration:	Caledonia Mining Corporation (Canada), Adastra Minerals Inc. (Canada), Zambezi Resources (Australia)
Gold mining:	Luiri Gold Zambia (Zambia owned), African Eagle Resources (UK)
Coal:	Maamba Collieries Ltd (MCL) (Government owned – in process of being privatised)
Gem stones:	Kariba Amethyst Marketing Ltd, Chinole Mining Company, Kagem Mining Ltd, Montana Mining Zambia Ltd, Reserved Minerals Corp. Ltd, Sachin Mines, Zambia Emerald Industries Ltd
Nickel:	Albidon Resources (Australia)

Tariffs, regulations and customs

Zambia follows a liberalised market system and therefore trades with the rest of the world without major restrictions. Since 1991, Zambia has been implementing an economic reform program. Trade liberalisation is an integral part of Zambia’s reform effort, thus indicating its confidence in the efficacy of open, competitive market economy and adherence to the principles of multilateral trade. To this effect, trade barriers have been substantially reduced and quantitative restrictions eliminated. Import controls are only maintained for health, security and associated reasons.

Customs duties are now the main trade policy instrument, and even these have been substantially reduced over the years, with the highest tariff being 25 per cent on finished products. The role of the state in the management of companies has been virtually removed. The government has created a pro-active private sector driven economy and an enabling environment.

Customs valuation is ad valorem on a CIF basis. A small number of goods may be imported into Zambia duty-free. These include medicines, pharmaceuticals, veterinary, and medical equipment, chemicals in bulk, fertilisers, and seeds. Most goods fall into one of three tariff bands: 5 per cent (selected raw materials, and capital equipment); 15 per cent (intermediate goods); or 25 per cent (final products). Duty on productive machinery for agriculture and mining is zero per cent.

In addition to the import duty, a value-added tax (VAT) of 17.5 per cent is payable on all imports. VAT is also payable on locally produced goods. VAT is levied on the duty paid value of the goods.

The Government of Zambia has adopted a pragmatic mineral policy, which is designed to enhance investment in the mining industry and to ensure the development of a self-sustaining minerals-based industry. The recent privatisation of the copper mining industry, formerly managed under the parastatal umbrella of Zambia Consolidated Copper Mines Ltd (ZCCM), is a clear demonstration of this intent.

Key objectives of the government's mining policy, published in 1995, are:

• To make the private sector the principal producer and exporter of mineral products through putting in place a privatisation program and to promote private sector initiative in the development of new mines in order to increase and diversify mineral and mineral-based products and exports. This will maximise long-term economic benefits to the country.
• To promote the development of the small-scale mining industry which has the potential to significantly contribute to the economy.
• To promote the development of gemstone mining and facilitate liberalised marketing arrangements in order to realise the industry's potential to contribute to the development of the economy.
• To promote the exploration and exploitation of industrial minerals and energy minerals and to encourage the establishment of a ferrous industry.
• To reduce the danger of ecological damage arising from mining operations as well as damage to the health of workers and inhabitants of the neighbourhood through air, water and land.
• To promote the local processing of mineral raw materials into finished products for added value.

Policy decisions within the ministry are made by the Minister, assisted by the Deputy Minister. The chief executive is the Permanent Secretary who directs four statutory departments - Geological Survey, Mines Development, Mines Safety and Headquarters, the latter being devoted to administrative matters.

Mining licensing system

Three types of license are available to the large-scale operator:

• Prospecting license - this confers the right to prospect for any mineral over any size of area for a period of two years renewable.
• Retention license - this confers the right to retain an area subject to the Minister's agreement, over which feasibility studies have been completed but market conditions are unfavourable for development of a deposit at that time. Size of area may be that covered by a prospecting license or smaller area as redefined by the license holder.
• Large-scale mining license - this confers exclusive rights to carry out mining operations and other acts reasonably incidental thereto in the area for a maximum of 25 years. The area to be held should not exceed the area required to carry out the proposed mining operations. Applications need to be accompanied by environmental protection plans and by proposals for the employment and training of citizens of Zambia. 

Similar rights are available to smaller operators, but on a reduced scale:

• Prospecting permits - relates to areas of 10km² and have a duration of two years non-renewable.
• Small-scale mining license - relates to areas not exceeding 400 hectares and have a duration of 10 years renewable.
• Artisans mining rights - gives the right to local people to mine on an artisanal basis in an area not exceeding five hectares, for a period of two years non-renewable.
• Gemstone license - holders may carry mining operations over an area, not exceeding 400 hectares for a period of not more than 10 years.

Geological survey

The primary roles of the geological survey are:

• To provide geological, geophysical, and geochemical data on a country-wide basis.
• To prospect on behalf of government.
• To act as a national depository of all information relating to the geology of Zambia.
• To provide support and advisory services to the public.

These are supported by a full spectrum of chemistry, geophysics, geology and cartography laboratories.

Health and safety legislation and regulations

The law regulates minimum health standards in industry, and the Department of Mines is responsible for enforcement of these regulations in the mining sector. Factory safety is handled by the Inspector of Factories under the Minister of Labour, but staffing problems limited enforcement effectiveness. There are provisions in the law to protect the right of workers to remove themselves from work situations that endanger health or safety without jeopardy to their continued employment.

Incentives to the copper and cobalt industries

Zambia is attempting to attract investment in its copper and cobalt industries, and has implemented certain incentives designed to do this. Tax concessions are given to all companies involved in the production of copper and cobalt, except for KCM and Mopani Copper mines.

The tax concessions include a reduction in the corporate income tax rate from 35 per cent to 25 per cent and a reduction in the mineral royalty tax from two per cent to 0.6 per cent on the gross revenue of mineral revenue produced in mine areas. The companies will also not pay withholding tax on dividends, royalties and management fees to shareholders or their affiliates, and on interest payments to shareholders or their affiliates, including any lender of money to the affected mining companies.

Additional incentives include relief from customs, excise duties and value-added tax, remission and deferment of royalties, development agreements, international arbitration and security of tenure for mining rights.

Marketing your products and services

Market entry

Although there is a well-developed supplier network in Zambia, very little of the equipment supplied into the Zambian industry is locally manufactured, and most distributors have long-standing agreements with South African and to an extent European and Australian suppliers. Moreover, there is a strong foreign engineering presence in the country, which feeds into the mining and metals fabrication sector.

Procurement of goods and services in the Zambian mining sector is done principally at two levels: large turnkey operations and repeat consumables.

In terms of the large turnkey operations, almost all of the work is outsourced to large regional and international mining engineering companies. As a result, many of the inputs are sourced by these companies from outside of Zambia as well.

Most local companies tend to operate at the services/maintenance end of the field, rather than at the actual manufacturing or fabrication end. Day-to-day requirements for the mines are primarily sourced in Zambia through small local companies and branches of foreign suppliers. The quality of local supplies can be an issue, and this can represent a good entry strategy for Australian companies to help with in terms of technology, joint ventures or skills development.
 
The main trade event held in Zambia is the International Trade Fair which takes place in June/July each year. The mining sector is well represented at the fair along with other industries.

Zambia International Trade Fair
Dates: 27th June to 3rd July 2007
Venue: Ndola, Copperbelt Province, Zambia
Tel: +260 2 651 514/6
Fax: +260 2 651 704
Website: www.zitf.org.zm

Links and industry contacts

Mining-related resources

Chamber of Mines – www.zacci.org.zm/m_sec_cofmines.php
Sub-division no. 18 of Farm no. 1937
Ntundwe Dr, Kalulushi
Tel: +260 2 748 453
Fax: +260 2 730 302
Email: comines@zamnet.zm  

Government, business and trade resources for Zambia

Government of Zambia – www.state.gov.zm

Department of Trade and Industry
PO Box 31968, Lusaka
Tel: +260 1 223 673
Fax: +260 1 223 273

Geological Survey Department
PO Box 50135, Lusaka
Tel: +260 1 250 056
Fax: +260 1 250 174
Email: gsd@zamnet.zm

Ministry of Mines and Minerals Development – www.zambia-mining.com
PO Box 31969, Lusaka
Tel: +260 1 252 130
Fax: +260 1 252 095
Email: mines@zamnet.zm

Zambia Association of Chambers of Commerce and Industry – www.zacci.org.zm
PO Box 30844, Lusaka, Zambia
Tel: +260 1 252 483 or 253 020
Fax: +260 1 252 483
Email: zacci@zamnet.zm

Zambia Bureau of Standards – www.zamstats.gov.zm
Lechwe House, Freedomway - South End, Lusaka
PO Box 50259, ZA 15101, Ridgeway
Tel: +260 1 231 385
Fax: +260 1 238 483

Zambia Investment Centre – www.zic.org.zm
PO Box 34580
Lusaka
Tel: +260 1 255 240
Fax: +260 1 252 150

Zambia Privatisation Agency – www.zpa.org.zm
PO Box 30819, Lusaka
Tel: +260 1 227 851 or 227 791
Fax: +260 1 225 270 

Zambia Revenue Authority – www.zra.org.zm
Private Bag W136, Lusaka
Tel: +260 1 226 227
Fax: +260 1 222 717
Email: advice@zra.org.zm

Contact details

The Australian Trade Commission (Austrade) is the Australian Government’s trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio.

Austrade assists Australian businesses contribute to national prosperity by succeeding in trade and investment, internationally, and promoting and supporting productive foreign investment into Australia.

Austrade:

• Delivers services that assist Australian businesses initiate, sustain and grow trade and outward investment.
• Promotes Australia as an inward investment destination and, with the States and Territories, supports the inflow of productive foreign direct investment.
• Administers the Export Market Development Grants scheme.
• Undertakes initiatives designed to improve community awareness of, and commitment to, international trade and investment.
• Provides advice to the Australian Government on its trade and investment development activities.
• Delivers consular, passport and other government services in designated overseas locations.

A list of Austrade offices (in alphabetical order of country) is available.

More information

For further information please contact Austrade on 13 28 78 or email info@austrade.gov.au

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