Best in Class

What strategy is being employed to cushion KCM from copper price volatility?

In 2016, we witnessed the lowest average copper price in 11 years. Although there has been a small uptick in prices, they will probably remain low for another 12-18 months before we see a significant increase. In a low price environment, there are three areas that a producer like us can focus on. The first of these is operational efficiency. For example, if a plant needs to run for 95% of the time for efficiency, then this should be maintained. Likewise, chemicals that are used for processing need to be recovered at dosages that are as close as possible to optimum levels. In addition, there are a whole load of mechanical maintenance and copper recovery type efficiencies that can be optimized. Secondly, when prices are low, the producer needs to negotiate better prices for consumables and raw materials. We have liaised with our suppliers to see what we can do in terms of reducing our overall cost of production by looking at pricing and quality. The third area of focus, and one that has set us apart from other mining companies in Zambia, is volumes. In October 2015, when the power crisis hit Zambia hard and ZESCO declared “force majeure,” rather than scale down our operations as other miners did, we pushed for higher, profitable volumes in order to reduce our overall cost of production. For us, it was the right strategy and the right way to address a difficult period in our operating history.

What measures need to be implemented by the public sector in terms of energy tariffs and mining regulation?

The government needs to tackle several issues, and indeed, is already doing so. Regulations surrounding power factors—an indicator of how efficiently power is being used—need to be enforced to ensure that large users of power can maintain high levels of efficiency. We are the largest consumer of power in the country, so our ability to source reliable power at affordable rates greatly impacts our performance and our sustainability. The Minister of Energy is eager to move toward a more cost-reflective tariff that takes into consideration the chain of sourcing energy—from generation all the way to transmission. It will be important to accommodate bulk buying rates and retail rates if Zambia is to continue to attract foreign investors into the sector.

What is your outlook for Zambia’s mining industry and for KCM in the medium term?

On the whole, the outlook is positive. Anil Agarwal, the Group Chairman of Vedanta Resources, recently met with His Excellency President Edgar Lungu and made a number of investment commitments. One of these is to move production levels to 400,000 tons of copper each year, which would quadruple production over the next three to seven years. This extra capacity will come from a number of sources, including the Konkola deep underground mine. We are currently working with consulting engineers and mining experts to review the technologies we employ and to boost productivity. Most importantly, we want to mine deeper. So far our deepest level is at 950m and our target is a next development at 1,100m. This will be a game changer for KCM. We are already the largest integrated copper producer in Zambia and the second-largest in Africa. Our smelter, one of four in the country, can produce 310,000 tons of copper every year.

How does KCM demonstrate its commitment to reducing its environmental impact?

KCM is working towards addressing all remaining legacy issues in respect of environmental matters. We are determined to be best in class as far as the environment is concerned and we have invested a substantial amount in reducing our environmental footprint and being a net-positive contributor to biodiversity. We have reduced the amount of water we consume across all our operations by 50% in the last three years, further enhancing our ability to attain zero discharge.