China's CNMC Acquires Zambia's Luanshya Copper Mines for $50 Million, Plans $400 Million Investment

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Researched by Industrial Info Resources (Sugar Land, Texas)--China Nonferrous Metal Mining Corporation (CNMC) (Beijing) has acquired a stake in the Luanshya copper mines (LCM), located in Zambia for an estimated $50 million. The Nonferrous Metals Mining Company Africa (NFCA), a subsidiary of CNMC, will operate the mines in Luanshya. Further, NFCA will also work on the Mulyashi and the Baluba mines that are a part of the joint venture formed by LCM's former owners, International Mineral Resources (Geneva, Switzerland) and Bein Stein Resources Group, which also operated Chambishi Metals plc, Zambia's largest source of cobalt.

The Mulyashi project is expected to produce about 60,000 tons of copper cathodes by the year 2010, while the copper-cathode production capacity of the Baluba mine, which stood at 30,000 tons per year prior to its closure, is expected to be restored once mining operations resume. CNMC will be required to upgrade the infrastructure and processing techniques at the Baluba mines, in addition to restoring all operations at the site in order to fully utilize its potential.

The $400 million investment in Luanshya, scheduled to be released during the next six months, will also be used for improving local facilities such as hospitals, schools and sports clubs, apart from developing mining infrastructure.

CNMC, along with Yunnan Copper Company Limited (SHE:000878) (YCC) (Kun Ming, China), has also invested $520 million in a copper smelter at the Chambishi mine in order to improve operations and associated services. The smelter unit at Chambishi will have a production capacity of 150,000 tons per year. CNMC acquired the Chambishi mine in 2003.

The Chambishi mine, located on the Zambia-Congo copper belt, holds about 5.01 million tons of copper reserves with an average ore grade of 2.2%. The investments made in the development of the mine were originally intended to transport the mined copper back to China, which proved to be an expensive process. With the commissioning of the smelter, copper blister will now be sent back to China, which, after being refined locally, is expected to hit the Chinese markets.

Zambia's current copper output, which stands at 600,000 tons per year, is expected to reach the 1 million-ton mark by 2010. In an effort to ensure local participation in copper mining ventures and stop undue closure of mines, the Zambian government had planned to hold a stake of 25-35% in such ventures. As part of the plan, the government has since increased its stake in the LCM venture from 15% to 20%.

Even as China is looking to gain a presence in the copper rich country, Zambia is also keen on utilizing Chinese knowhow in exploiting its mineral resources. Copper exports presently contribute 80% of Zambia's revenue. The country's copper production, which has seen a downturn in recent years, is likely to regain momentum with rising copper prices. Demand for copper is expected to increase as copper inventories around the world continue to fall.

CNMC was chosen from among the four bidders for the contract, which included Exco Resources Limited (ASX:EXS), Luanshya Mineral Resources Limited, and Vedanta Resources plc (LSE:VED) (London, United Kingdom), which runs the Konkola copper mines, the largest copper mine in Zambia.

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