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How Can Zambia Improve the Competitiveness of its Mining
Industry and Increase the benefits from Copper?
May 2010Frank RussellSunil Sinha
Supported by the World Bank, DFID, and AfDB
Jobs and Prosperity – Building Zambia’s Competiveness (JPC)
Agenda
Global Prospects for Copper Copper still has much to offer Zambia How Attractive is Zambia for investment? How Competitive is the Zambian
Industry? What role can Mining play in Zambia’s
prosperity? What is needed to realize the Potential?
Strong international demand
1 million tonne p.a. growth =
annual output from
Zambia
Driven by growth and urbanisation in emerging
markets
Source: UK Population Division, Deutsche Bank Research, Global Insight, JP Morgan research
Will cause supply shortfall
Potential for long term Copper price to be high (with short term
volatility)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 '00 '02 '04 '06 '08 Q109
Q309
Q110
Actual
Real
Qtly Avs Q1 09 – Q1 10
(Annual Averages adjusted by US GDP Deflator 2005 = 100)
Agenda
Global Prospects for Copper
Copper still has much to offer Zambia
How Attractive is Zambia for investment? How Competitive is the Zambian
Industry? What role can Mining play in Zambia’s
prosperity? What is needed to realize the Potential?
Rapid growth, market share recovering
• Copper output at 1970s level-700,000 t/year
• Growing at about 8% a year
• World market share recovering
spcZambian Share of World
Refined Copper Production
0
2
4
6
8
10
%
Source: ICSG; IWCC
Zambia 7th in world copper production, improved from 11th place
Source: Reuters, 2009
Zambia has not maximised mining’s contribution
Major industry, leading growth
Major export > 80% valueBUT
Contribution to revenue low (1%-1.5% GDP) though likely to increase
Employment <50,000 Few supply linkages
Source: ZamStat
Agenda
Global Prospects for Copper Copper still has much to offer Zambia How Attractive is Zambia for
investment? How Competitive is the Zambian
Industry? What role can Mining play in Zambia’s
prosperity? What is needed to realize the Potential?
Mining companies will wish to invest where returns are
highest• Mining companies will invest – new
technology opens up low grade deposits
• Will invest where risk adjusted returns highest:
Good investment environment Competitive industry – investment
decisions made at $4400/t ($ 2/lb) even if prices forecast to remain higher.
Zambia has the copper resources to attract investment
• 6% of world copper resources
• 2.8 billion tonnes resources at existing mines
• Additional resources outside Copperbelt
• 40% of country not surveyed
Will require:– Exploration
investment– New mining
investment– New technology
New resources outside Copperbelt
Mumbwa
Influential industry surveys rank Zambia in bottom third of where to
invest
Zambia ranks 18/25
Closer look at the Behre Dolbear ranking
Economic system
Political
system
Social issues
Permitting delays
Corruption
Currency
stability
Tax regim
e
Total points
Australia
10 9 8 8 10 8 7 60
Chile 9 8 7 7 8 7 4 50
Ghana 6 6 3 7 4 6 6 38
Namibia
5 6 3 5 4 5 6 34
Tanzania
5 5 3 7 3 4 5 32
Zambia 5 4 2 5 3 2 4 25DRC 2 3 3 3 1 1 4 17
Highest score possible is 70, Australia scores highest. Zambia’s score has fallen from previous year
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