Saturday, April 4, 2009

Zambia to enlarge its stake in copper producers

By Shapi Shacinda [Reuters]

Zambia would raise its stake in foreign-owned copper mining companies to up to 35 percent to have a bigger say and prevent mine closures, Minister of Mines and Minerals Development Maxwell Mwale said yesterday.

Mwale said Africa's leading producer of copper did not plan to nationalise the copper mines, but would negotiate with the companies and seek to convert debt owed to the government into equity.

He gave no timeline on when the government would implement the move to raise its shareholdings, but said Zambia would inform mining firms of the new plan soon.

Labour unions have urged the government to take a bigger stake in the mines to exert its influence, prevent closures and save jobs.

It would target a stake of between 25 percent to 35 percent from the average of 15 percent it now held in copper firms.

He said: "We want to have a maximum of 35 percent shareholding so that we can have influence in decision making. Only by taking 51 percent would amount to nationalising the industry.

"Even the existing mines, if they have (financial) obligations to the government, we will liquidate the obligations through converting liability into equity."

The companies that operate in Zambia include Vedanta Resources, listed in London; Canada's First Quantum Minerals; Australia's Equinox Minerals; and Swiss-based Glencore International.

Mwale said Zambia would offer a 75 percent stake to new foreign investors bidding to run the shut Luanshya copper mine, which it expected to take back from its owners within days.

He said Zambia's copper production this year would be more than 600 000 tons. The country produced 569 887 tons last year, according to a treasury report.

Mwale said that Zambia expected higher output due to stronger copper prices and the scrapping of a controversial 25 percent windfall tax.

"The price of copper has picked up: we closed at $2 800 (R27 181) a ton in December and now the price is at $4 000.