March 30, 2009 / 10:51 AM / 10 years ago

INTERVIEW-UPDATE 1-Zambia to raise stakes in copper mines

* Zambia says move not nationalisation

* To boost stake by converting govt debt into equity

* Sees copper ‘09 output above 600,000 T vs 569,887 T in ‘08

(Adds quotes on stake, copper production, details)

By Shapi Shacinda

LUSAKA, March 30 (Reuters) - Zambia, Africa’s top copper producer, will raise its stake in foreign-owned copper mining firms to up to 35 percent to have a bigger say in their running and prevent mine closures, a cabinet minister said on Monday.

Maxwell Mwale, Zambia’s mines and minerals development minister told Reuters the country did not plan to nationalise the copper mines, but would negotiate with the companies and seek to convert debt owed to government into equity.

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

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

Mwale said Zambia would target a stake of between 25 to 35 percent from the average of 15 percent it holds in copper firms.

“We want to have a maximum of 35 percent shareholding so that we can have influence in decision making,” Mwale said in an interview. “Only by taking 51 percent would it 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,” Mwale said.

London-listed Vedanta Resources Plc VED.L, Canada’s First Quantum Minerals (FM.TO), Equinox Minerals Ltd EQN.TOEQN.AX and Glencore International AG [GLEN.L] operate in Zambia.

TARGETS

“It is desirable for the government to have at least 25 percent shareholding,” Mwale said.

“We are first targeting those mines which are closing down. Any mine like in the case of Luanshya, when reselling the mine, we will have at least 25 percent.”

Mwale said Zambia would offer a 75 percent stake to new foreign investors bidding to run the shut Luanshya Copper Mine (LCM), which it expects to take back from its owners by April.

LCM had been targeting copper output of 80,000 tonnes by 2010 from about 24,000 tonnes but shut its Baluba mine and Chambishi Metals Plc, the country’s largest cobalt producer.

LCM also put off the $354 million Mulyashi copper project, which was due to start producing 60,000 tonnes copper in 2010.

Mwale said copper output would rise this year compared with last year, partly due to tax incentives and a stronger price.

He said Zambia’s copper production this year would be above 600,000 tonnes. The country produced 569,887 tonnes last year, according to a Treasury report seen by Reuters.

Mwale said 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 significantly, we closed at $2,800 per tonne in December and now the price is at $4,000. The message is that the price is good ... the problem is they have inefficient operations,” Mwale said. (Editing by James Macharia and ames Jukwey)

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