MACIG Connect Series
Other investment went into new concentrator and smelting capacity at Nchanga.
Incorporating various mine sites, as well as several concentrators and smelters, KCM is now a household name in Zambia. How has the operation evolved since Vedanta’s acquisition of the assets 10 years ago?
Steven Din (SD): Vedanta first became a shareholder in KCM in 2004, when ZCCM was in the process of unbundling its mining operations. At this time, KCM comprised an underground mine and surface facilities at Konkola in Chililabombwe, surface assets and an underground mine at Nchanga, smelter and refinery at Kitwe, and a small pyrite mine 40 kilometers (km) outside of Lusaka. Many of these assets were approaching the end of their operational life, but Vedanta saw great potential to invest in KCM and embarked upon a series of new construction and refurbishment projects, particularly in the Konkola Deep Mine, where a shaft was sunk to 1.5 km and a mechanized, trackless mine built. The remaining investment went into new concentrator and smelting capacity at Nchanga together with the associated assets. At Nkana, we decommissioned the old smelter, which made use of primitive technology with low sulphur capture. The new smelter at Nchanga has a 310,000-metric tons per year (mt/y) capacity with 99.7% sulphur capture – the second highest in the world. The Nkana refinery was upgraded to around 300,000 mt/y of cathode output. So, it is a portfolio of assets that we are proud of and positions us well for the future.
How has KCM sought to control its costs as falling copper prices have put increasing pressure on mines’ profit margins?
SD: The textbook response to that is that we need to ensure that the business sits in a competitive area on the industry cost curve. This has become even more important in this period of low copper prices. We are transitioning from high-grade, high-volume, open-pit production to an underground operation in ramp-up mode. Witnessing the fall in the copper price to as low as $5500/mt, we took measures to increase our efficiency across several areas, including production enhancement and curtailment of wasteful expenditure. In February, we implemented a 10-week plan to evaluate these areas and the first effects were felt in March. We have reduced our cost base by around 15%. We have now achieved all of the recovery gains that we were hoping for and are now working on the increased production kick.
KCM’s operations produce a large number of byproducts. How important is this secondary production to your business?
SD: KCM is the largest integrated producer in Zambia. There are several miners that take production through to concentrate or anode stages but we beneficiate all the way from mined ore to refined cathode, which is eventually exported under the REC classification on the LME. We also export KBC cathodes that are pro-duced at our leach plant and SX-EW plant. Further to this, KCM has important by-products. These include anode slimes, cobalt, and, where possible, sulfuric acid. Cobalt is produced as part of a copper-cobalt alloy but we are investigating the possibility of developing our production chain to be able to sell 100% pure cobalt and extract more value from the resource.
KDMP is one of the largest investments ever undertaken in Zambia. Could you provide us with some more details on its status and how it will improve KCM’s operations?
SD: The investment at the Konkola Deep Mine Project (KDMP) is now complete. The project encompassed sinking the deepest shaft in Africa, building a mechanized, trackless mine and upgrading the surface facilities across two locations. In total, the development cost has been $3 billion and half of this was on the KDMP. The shaft is now in operation and the underground mine is around 90% complete. Total throughput capacity for the new shaft stands at 7 million mt/y ore, although in the first few years of operations we will run at around one third of this.
How does KCM recruit its workers and do you have much interaction with local education institutions?
SD: Our workforce numbers 16,000 people, around half of whom are full-time employees and the other half are contracted employees. In addition to close link links with the two key universities in Zambia, we run a system whereby we second many Zambian employees to our operations across in Southern African and India to get exposure and training on-the-job. We are in early-stage discussions with the University of Zambia to investigate how to further improve local, technical education standards and boost the number of engineers and geologists that are being trained in the country.
Building strong community relations has become an integral part of the modern mining industry. What CSR initiatives is KCM involved with in Zambia?
SD: KCM has four CSR pillars: health, education, sustainable livelihood and sport. When KCM was acquired, Vedanta took on the responsibility of running significant health facilities in the locations where it operates – two hospitals, eight clinics and seven smaller clinics. These provide health services to our employees and their dependents together with any contractors who wish to use the facilities. We run two primary schools and two secondary schools, with over 2,000 students enrolled. The secondary schools now offer A-level education, which is a more internationally recognized qualification for students to gain entry into tertiary education. There are currently 40 students who we are sponsoring to study at foreign universities. Our sustainable livelihood programs have helped improve quality of life to rural communities around our operations and one project, to which we donated livestock, has now used the same model and donated to a neighboring community. The last pillar is sport. Football has always played an important role in Zambia, and we proudly sponsor three football teams in Chililabombwe, Chingola, and Nampundwe.
How do you hope to develop KCM’s operations over the coming three to four years?
SD: Going forward, we want to focus our operations on the most profitable sources. This means mining good grades at high volumes. The focus will be on the Konkola underground and leaching facilities at Nchanga. There may be the possibility of building an underground network under the old pits at Nchanga and expanding our leach facilities, but this will require capital. We are always looking to see how we can use innovation to improve our productivity.
In a very competitive environment, why should investors come to Zambia and why should they choose KCM?
SD: Zambians understand copper, and it is always beneficial to be operating in an environment where the peo-ple around you understand the industry. It is very encouraging that the government has shown itself to be open to negotiation with the industry. Many figures in the government grew up working for ZCCM or have family who worked in the sector. The future is very bright for Zambia and for KCM.
This interview was part of research being conducted by GBR for its upcoming Mining in Africa Country Investment Guide (MACIG) 2016. A pre-release report on the Central African Copperbelt was released in May 2015 and can be accessed here. To participate in this report, please contact Molly Concannon at email@example.com or +244 940 514 806.