investment opportunities in the mining sector in zambia japanese business delegation presentation by...

INVESTMENT OPPORTUNITIES IN THE MINING SECTOR

IN ZAMBIAJAPANESE BUSINESS DELEGATION

PRESENTATIONBY D. CHILUMBUCHIEF MINING ENGINEER – MINES DEVELOPMENT

MINISTRY OF MINES AND MINERALS DEVELOPMENT26TH JANUARY, 2010

INVESTMENT OPPORTUNITIES IN THE MINERAL SECTOR IN ZAMBIA

PRESENTATION OUTLINE BRIEF BACKGROUND OF MINING INDUSTRY IN ZAMBIA AND ZAMBIA’SINVESTMENT STRATEGY FOR THE MINING SECTOR. WHY IT IS GOOD TO INVEST IN ZAMBIA’S MINERALS INDUSTRY

THE DIVERSITY OF THE MINERALS RESOURCES ENABLING POLICY INVESTOR PROTECTION

INVESTMENT AREAS EXPLORATION MINING PRODUCTION OF MINING SUPPORT MATERIALS AND EQUIPMENT VALUE ADDITION - COPPER

INVEST IN ZAMBIA'S MINING INDUSTRY

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INVESTMENT OPPORTUNITIES IN THE MINERAL SECTOR IN ZAMBIA WHERE IS ZAMBIA?

INVEST IN ZAMBI'S MINING INDUSTRY 3

MozambiqueZAMBIAAngola

DRC

Namibia

South Africa

Tanzania

•In the Heart of Africa

•Landlocked

•Size: 752,614 sq.km

•Population: 12 million

•Tropical Climate

•Major Economic Drivers:

1.Mining2.Agriculture3.Tourism4.Manufacturing

Madagascar


BRIEF BACKGROUND OF THE MINING INDUSTRY IN ZAMBIA

• SINCE THE FIRST MAJOR PHASE OF MINING OF THE CU-CO MINERALIZATION OF THE COPPERBELT IN THE 1930’S, THE MINING INDUSTRY HAS BEEN AN ESSENTIAL AND INTEGRAL COMPONENT OF ZAMBIA’S ECONOMIC DEVELOPMENT.

• A WIDE SPECTRUM OF METALLIC AND INDUSTRIAL MINERALS AND ENERGY RESOURCES HAVE SINCE BEEN IDENTIFIED AND TO A VARIABLE EXTENT, HAVE BEEN EXPLOITED.

• MINING IN ZAMBIA HAS BEEN PREDOMINANTLY FOR COPPER AND COBALT.


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BRIEF BACKGROUND OF THE MINING INDUSTRY IN ZAMBIA

OWNERSHIP CYCLE

• FROM THE EARLY 1930S TO 1978 THE MINING INDUSTRY WAS PRIVATE SECTOR DRIVEN.

• ROAN SELECTION TRUST (RST) A PRIVATE COMPANY , LATER CHANGING TO ROAN CONSOLIDATED MINES (RCM), OWNED LUANSHYA, MUFULIRA,

• KALULUSHI AND CHAMBISHI MINES.

• NCHANGA CONSOLIDATE COPPER MINES (NCCM) WAS ANGLO AMERICAN LTD PRIVATE COMPANY AND OWNED NKANA , KANSANSHI, NAMPUNDWE, KONKOLA AND NCHANGA MINES.

• THE MINES WERE NATIONALIZED 1972 AND WERE LATER MANAGED BY A STATE COMPANY CALLED ZAMBIA CONSOLIDATED COPPER MINES LIMITED (ZCCM LTD) IN 1982.

• THE MINING INDUSTRY WAS PRIVATIZED IN 2000 AND IT HAS SINCE THEN BEEN PRIVATE SECTOR DRIVEN.


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DIVERSITY OF MINERALS FOR INVESTMENT OPPORTUNITIES

• ZAMBIA HAS WIDE SPECTRUM OF MINERAL RESOURCES AND SPANS A RANGE OF METALS, PARTICULARLY COPPER, COBALT, GOLD,

MANGANESE, NICKEL AND GEMSTONES.

• THERE IS ALSO A VARIETY OF INDUSTRIAL MINERALS AND ENERGY RESOURCES SUCH AS URANIUM AND COAL IN THE SOUTHERN PART OF ZAMBIA.

• MINERALS DEVELOPMENT IN ZAMBIA RANGE IN SIZE FROM WORLD CLASS OPERATING MINES TO SMALL PROSPECTS.

• ZAMBIA HAS POTENTIAL FOR COMMERCIAL DEPOSITS OF OIL AND GAS.

• THE MULTIPLICITY AND VARIETY OF RESOURCES DEMONSTRATE CLEARLY THE OPPORTUNITIES FOR EXPLORATION AND EXPLOITATION.


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DEMAND FOR MINERAL RESOURCES IN THE WORLD

DEMAND FOR MINERAL RESOURCES CONTINUES TO RISE AND IS POSITIVELYAFFECTING THE COMMODITY PRICES IN THE INTERNATIONAL MARKETS. THEUNPREDICTABLE MARKET FORCES HAVE NOT DETERRED INVESTORS IN THE MININGINDUSTRY AND THE WORLD CONTINUES TO WITNESS EMERGENCE OFEXPLORATION, DEVELOPMENT OF GREENFIELD MINES, EXPANSION OF EXISTINGMINES AND METAL PROCESSING PROJECTS.

HIGH GRADE MINERAL DEPOSITS ARE GETTING DEPLETED FROM THE EXISTING OLDMINES AND MINING COMPANIES ARE REDEFINING RESOURCE CUT OFF GRADES TOATTRACT INVESTORS IN THE RECOVERABLE LOW GRADE-HIGH VOLUME MINES.

AND PROCESS ENGINEERS ARE INCREASINGLY BEING CHALLENGED TO DEVELOPPROCESSES THAT CAPTURE LOW GRADE MINERAL RESOURCES AT HIGH RECOVERY RATES AND AT LOWER OPERATING COST PROFILES.

EQUIPMENT MANUFACTURES ARE MOVING AWAY FROM CONVENTIONALENGINEERING TO INTELLIGENT INVESTOR-SENSITIVE, INVESTOR-FRIENDLYMANUFACTURING PROCESSES THAT LEAD TO PRODUCTION OF LOW COST BUTDURABLE AND EFFICIENT EQUIPMENT AND MACHINERY.


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MINING VALUE CHAIN DEVELOPMENT

SUPPLIERS ARE MORE THAN EVER BEFORE SENSITIVE TO THE KNOCK ON EFFECTS THE UNPREDICTABLE COMMODITY PRICING HAS ON THEIR LONG TERM BUSINESS VIABILITY AND ARE ADAPTING STRATEGY THAT ENHANCE THE VALUE CHAIN.

MORE IMPORTANTLY, THE INVESTOR TODAY IN THE MINING AND MINING RELATED INDUSTRY IS AWARE OF THE RISK THE CYCLIC COMMODITY DEMAND CREATES ON THE RETURN OF THEIR INVESTMENTS AND ARE ABLE TO PUT IN PLACE STRAGTEGIC PLAN TO MITIGATE DOWNTURNS

• MORE THAN ANYTHING ELSE IN THE MINING INDUSTRY, IS THE NEED TO CREATE INVESTOR CONFIDENCE IN THE HOST COUNTRY, AND IT IS AGAINST THIS BACKGROUND THAT I WISH TO TAKE THIS OPPORTUNITY TO STATE THAT ZAMBIA HAS BEEN A HAVEN FOR LONG TERM MINING INVESTMENT DESTINATION


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ZAMBIA’S MINING SECTOR MODUS OPERANDI

DISTINGUISHED DELEGATES THE GOVERNMENT OF THE REPUBLIC OF ZAMBIA HAS A STRONG

AND CLEAR VISION, WHICH IS AS FOLLOWS:

TO HAVE A VIBRANT, WELL ORGANIZED PRIVATE SECTOR AND PRIVATE-PUBLICPARTNERSHIP DRIVEN MINING SECTOR CONTRIBUTING IN EXCESS OF 20% TO GDP ANDPROVIDING A PLATFORM FOR SUSTAINABLE ECONOMIC GROWTH OF THE COUNTRY.

BASED ON OUR EXPERIENCE AS DEMONSTRATED IN THE FOLLOWING GRAPH, WEBELIEVE THAT THE DIRECT FOREIGN INVESTMENT (FDI) PROVIDES THE BEST WAY TO PROMOTE EXPLORATION AND DEVELOPMENT OF MINES TO PRODUCTION.


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GOVERNMENT STRATEGY FOR MINING SECTOR GROWTH

THEREFORE, THE GOVERNMENT ENDEAVORS TO ATTRACT AND ENCOURAGEPRIVATE SECTOR PARTICIPATION IN THE EXPLORATION FOR, AND COMMERCIAL EXPLOITATION OF MINERAL RESOURCES.

WE ENCOURAGE COMPLETE INVESTMENT PACKAGES THAT LOOK AT TOTALDEVELOPMENT, FROM EXPLORATION, TO MINING, TO DOWNSTREAM VALUE ADDITION STAGE.

I WISH TO STATE THAT THE GOVERNMENT IS COMMITTED TO ENHANCINGTRANSPARENCY AND ACCOUNTABILITY IN THE MINERALS SECTOR AND ENSURINGTHAT THE EXPLOITATION OF MINERALS IS USED FOR THE BENEFIT OF THE

ZAMBIANCITIZENS AND INDEED THE INVESTORS.


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GOVERNMENT STRATEGY FOR MINING SECTOR GROWTH CONT’D

AGAINST THIS EFFORT THE GOVERNMENT UNDERTAKES TO PROTECT THE

INVESTOR’S INVESTMENT AND HIS PERSON. THE GOVERNMENT HAS PUT UP

FAVOURABLE POLICY ENVIRONMENT FOR PRIVATE INVESTMENT.

ON THE INVESTMENT POLICY FRONT, THE NEW MINING FISCAL AND

REGULATORY REGIME OFFERS ATTRACTIVE INCENTIVES FOR INVESTORS.

THE GOVERNMENT IS AWARE THAT MINING INVESTORS MUST MAKE A

REASONABLE RETURN ON THEIR INVESTMENT AND ENSURES THAT THIS IS SO.

WE REALISE THAT WE ARE PART OF THE LARGER POLITICAL, COMMERCIAL AND

TRADING ENVIRONMENT AND ARE THEREFORE SENSITIVE TO GLOBAL

INVESTMENT ETIQUETTE.


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ZAMBIA HAS A NEW MINING FISCAL AND REGULATORY REGIME WHICH

INCORPORATES THE FOLLOWING MEASURES:-

30% CORPORATE TAX;

MINERAL ROYALTY RATE ON BASE METALS AT 3% OF GROSS VALUE;

15% WITHHOLDING TAX ON INTEREST, DIVIDENDS, ROYALTIES, MANAGEMENT FEES AND PAYMENTS TO AFFILIATES OR SUBCONTRACTORS IN THE MINING SECTOR;

NO WINDFALL TAX;


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MINING SECTOR FISCAL REGIME

100% CAPITAL ALLOWANCE DEDUCTIONS FOR THE MINING SECTOR;

A HOLDER OF A MINING RIGHT IS EXEMPT FROM CUSTOMS, EXCISE AND VAT DUTIES IN RESPECT OF ALL MACHINERY AND EQUIPMENT (INCLUDING SPECIALIZED MOTOR VEHICLES) REQUIRED FOR EXPLORATION OR MINING ACTIVITIES;

THERE ARE NO RESTRICTIONS IN RESPECT OF THE AMOUNT OF PROFITS,

DIVIDENDS, OR ROYALTIES THAT MAY BE EXTERNALIZED.


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MINING SECTOR FISCAL REGIME

ENABLING ENVIRONMENT FOR INVESTMENTS

ON THE POLITICAL FRONT, WE ARE A PEACEFUL COUNTRY WHICH HAS NO

HISTORY OF SEARCH PARTIES FOR ABDUCTED FOREIGNERS AND NO HISTORY

OF IMPULSIVE SEIZURES OF INVESTOR ASSETS.

THE GOVERNMENT IS MANDATED BY THE PEOPLE OF ZAMBIA WHO ARE THE

OWNERS OF THE MINERAL RESOURCE TO FACILITATE AN ORDERLY AND

SUSTAINABLE DEVELOPMENT AND EXPLOITATION OF THE RESOURCE WITH THE

SOLE OBJECTIVE OF EFFECTING ECONOMIC DEVELOPMENT FROM THE

PROCEEDS OF THE EXPLOITED MINERAL RESOURCES.

IT IS THIS MANDATE THAT I WISH TO UNDERSCORE AT THIS GATHERING. I AM

LOOKING TO INTEREST INVESTORS TO ZAMBIA’S MINING INDUSTRY.


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ZAMBIA FRONTIER FOR PETROLUEM EXPLORATION AND DEVELOPMENT

I NOW WOULD LIKE TO TALK A BIT MORE ABOUT OIL AND GAS POTENTIAL IN ZAMBIA. WE SIT IN A REGION IN WHICH BOTH TO THE NORTH EAST, NORTH WEST AND SOUTH-EAST, OIL AND GAS HAVE RECENTLY BEEN DISCOVERED. WE HAVE ENACTED A LAW ON OIL EXPLORATION AND PRODUCTION.

ON THE BASIS OF THE RESULTS OF THE PRELIMINARY WORK DONE BY MYCOLLEGUEAS THE MINISTRY OF MINES TO DATE, THE GOVERNMENT RECENTLYADVERTISED FOR TENDERS AND AWARDED THE SUCCESSFUL BIDDERS THE VARIOUSEXPLORATION BLOCKS FOR OIL AND GAS IN SOME PARTS OF ZAMBIA WHERE THERESULTS HAVE SHOWN CONSIDERABLE PROBABILITIES FOR THE EXISTENCE OFCOMMERCIAL DEPOSITS.

THE RESPONSE FOR THE BLOCKS ON OFFER WAS OVERWHELIMING. EIGHT COMPANIESPARTICIPATED IN THE BIDDING AND 11 BLOCKS HAVE SINCE BEEN AWARDED TO THESUCCESSFUL BIDDERS. WE ANTICIPATE THE DETAILED PETROLUEM EXPLORATIONACTIVITIES TO START IN EARNEST . THE RESPONSE FROM THE INITAIL BIDDING ROUND INDICATES THE CONFIDENCE ON THE ZAMBIAN INVESTMENT CLIMATE AND POTENTIAL FOR DISCOVERY OF OIL AND GAS.


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OPPORTUNITIES FOR INVESTMENT IN MINING VALUE CHAIN

FINALLY LADIES AND GENTLEMEN, MAY I TAKE THIS GOLDEN OPPORTUNITY TOPOINT YOU TO THE OTHER NUMEROUS INVESTMENT OPPORTUNITIES IN ZAMBIA AND BRIEFLY THESE ARE:

VALUE ADDITION TO THE COPPER BEING PRODUCED BY ZAMBIA’S MINING INDUSTRY AND TO BOOST THE MANUFACTURING SECTOR FOR CABLES, COPPER RODS, COPPER TUBES AND CHEMICALS.

CREATION OF MANUFACTURING INDUSTRY TO PRODUCE MINING INDUSTRY CONSUMABLES.

DEVELOPMENT OF MANUFACTURING FACILITIES BASED ON INDUSTRIAL MINERALS SUCH AS PHOSPHATES, ACTIVATED CLAYS, BENTONITIC CLAYS, FLUORITE, GYPSUM AND BARYTE FOR VARIOUS INDUSTRIAL USAGE.


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PRIVATE SECTOR LED ECONOMIC GROWTH

• IT IS THE PRIVATE SECTOR THAT IS THE ENGINE OF ECONOMIC GROWTH IN ANY COUNTRY AND THIS IS TRUE OF MODERN ZAMBIA.

• THE GOVERNMENT OF THE REPUBLIC OF ZAMBIA HAS TAKEN A LEAF FROM ALL SUCCESSFUL, DYNAMIC ECONOMIES TO CREATE THE NECESSARY ECONOMIC AND INVESTMENT ENVIRONMENT THAT WILL FOSTER THE DYNAMIC GROWTH OF THE PRIVATE SECTOR AND THE COUNTRY,

DISTINGUISHED GUESTS, I WISH TO END BY THANKING YOU FOR

AFFORDING ME AN OPPORTUNITY TO ADDRESS YOU AND INVITE YOU ALL

TO INVEST IN THE MANY OPPORTUNITIES IN ZAMBIA’S MINERAL AND

PETROLEUM SECTORS.

I THANK YOU FOR YOU ATTENTION


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ZAMBIA’S VICTORIA FALLS WELCOMES YOU


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