Vedanta's Zambian Konkola Mines To Double Copper Cathode Output

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Researched by Industrial Info Resources (Sugar Land, Texas)--Konkola Copper Mines (KCM) (Chingola, Zambia), part of leading mining major Vedanta Resources plc (LSE:VED) (London, United Kingdom), has unveiled a new business plan to double the production of copper cathode to 305,000 tons this year. The increased output will account for more than 50% of Zambia's total copper production of 600,000 tons this year. In 2008, the copper cathode production at KCM was about 140,000 tons. The company will also recommence the operations of its cobalt production facility. KCM, which ceased cobalt production a couple of years ago, is expected to produce 5,000 tons this year.

KCM operates the Nchanga open pit, Nchanga smelter and Fitwaola satellite mines. The company is also developing the Konkola Deep Copper Project, which at 1,492 meters, is touted to be Africa's deepest copper mine. Vedanta Resources, a leading producer of iron ore, zinc, aluminum and lead, has large copper assets in India, Tasmania, Australia and Zambia.

The new business plan, "Tubombe Tusunge," launched by KCM this year, aims to bring down production costs and increase production capacity. The strategy also includes improving plant environment safety, reducing thefts and increasing productivity of operations in the long run. The plan includes the proposal to increase copper cathode production at KCM to 305,000 tons this fiscal year at an operating cost of $1 per pound. As part of this initiative, KCM aims to achieve a target production of 500,000 tons of copper by 2011.

KCM is investing approximately $500 million in the Konkola Deep Copper Project, which will be commissioned in 2011, and $300 million in the Nchanga smelter. The Nchanga smelter, with a current capacity of 300,000 tons per year, was commissioned in 2008. The smelter, based on direct-to-blister technology, was shut down in April after the flash furnace was severely damaged in a fire outbreak. The smelter restarted operations in May 2009.

KCM has indicated that it will go ahead with the company's forward-looking long-term plan, which will increase production at lower input costs. KCM hopes that this strategy will bring in larger profits and ensure better pay for employees. The firm's move comes at a time when most mining companies throughout the world are either deferring expansion plans or scaling down operations because of declining metal prices. KCM has also faced the impact of the economic crisis, having dismissed 1,800 employees in April this year. According to the Mine Workers Union of Zambia, since December 2008 more than 8,000 people in the mining industry in Zambia have lost their jobs because of the global financial crisis.

The Central African belt, consisting of Congo and Zambia, has the largest, richest and highest grade of copper in the African continent. More than 95% of Zambia's reserves are located in this region, in the rocks of the Lower Roan Group. The country generates about 80% of its revenues from exports. The Zambian government had to seek an emergency loan from the International Monetary Fund (IMF) (Washington, D.C.) to boost its plunging foreign exchange reserves. Industry experts indicate that Zambia may earn only half of its projected revenue of $140 million from mineral taxes. The fiscal deficit is also likely to reach 1.8% of the gross domestic product (GDP) this year, in comparison to 1.2% in 2008. In May, the IMF sanctioned an additional three-year loan of $256.4 million, $160.1 million of which will be released immediately to Zambia.

According to a recent report on the global metals industry published by JP Morgan (New York, New York), the demand and price for copper in 2009 will depend primarily on Chinese demand. The study states that while the average copper price worldwide in October 2008 was about $3.15 per pound, the price will be under $1.90 per pound this year. Both JP Morgan and Barclays Capital (London) are bullish about copper price trends in 2010. While Barclays is expecting the global average price to touch $2.49 per pound, JP Morgan's conservative forecast pegs it at $2.09 per pound.

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