Vedanta to Resume Production at Konkola Copper Mines with $1 Billion of New Investment
Zambia’s government has agreed a deal that will return ownership of the Konkola Copper Mines (KCM) to Vedanta, four years after the group left the mine, as part of new initiatives to drive massive growth in the mining sector.
In 2019, then-President Edgar Lungu’s pursuit of nationalised mining involved seizing control of KCM from Vedanta, with the Popular Front (PF) government using its 20 per cent stake in the mine to place KCM in provisional liquidation.
Vedanta launched a legal battle, and KCM struggled under state control. Incentives under PF rule such as royalty increases, double taxation and import levies thoroughly undermined the profitability of the Zambian mining sector. As opposition presidential candidate, Hakainde Hichilema assured voters he would restore the major contribution Zambia’s mines had once made to the economy.
Edgar Lungu lost his bid for re-election in 2021 to opposition leader Hakainde Hichilema and his UPND ‘New Dawn’ party. It was reported in June 2022 that President Hichilema’s government was looking for a new investor in KCM and other major mines, as part of efforts to reanimate the copper sector.
Minister of Mines and Minerals Development Paul Kabuswe said in November 2022 that any solution for KCM would have to involve Vedanta. Last Friday, Kabuswe told reporters that he was “counting days, it’s no longer months”, referring to the return of Vedanta.
With KCM back under its ownership, Vedanta is pledging investments totalling $1 billion over five years to revive the site, a key clause in the government’s conditional agreement with Vedanta.
Copper at the Vedanta KCM warehouse. (Bloomberg)
Vedanta will also finance payments totalling $250 million to local creditors of the mine, in order to restore its majority state. The group will also increase KCM mineworker salaries by 20%, and issue a one-time payment of K2,500 to each mineworker.
Announcing the deal, Mines Minister Paul Kabuswe said, “Vedanta will return to run and resuscitate the operations of KCM as the majority shareholders”.
Anil Agarwal, Vedanta’s owner, said that the goal of the mining company would be to “become a fully integrated producer of copper and cater to India’s fast-growing demand while also making Zambia the leading producer of copper in the world”. Vedanta has pledged to double annual production to 100,000 tonnes, with the goal of reaching 200,000 tonnes as quickly as possible.
Zambia is currently the second-largest producer of copper in Africa, and the seventh largest in the world. Its ore deposits are among the highest quality and largest in the world. Many of its deposits have yet to be mined, owing to historical largely open pit mining not affecting deeper veins of copper ore.
Zambia’s copper offers opportunity for new mining innovation and investment as the green energy revolution continues to gain pace. Demand for copper, as a conductive metal present in almost all electrical components, is increasing at an unprecedented rate. It is estimated that the global copper industry needs to invest more than $100 billion in mines to match the world’s annual supply by 2030, a major opportunity for copper-rich nations such as Zambia.
Zambian copper ore. (Copperbelt Katanga Mining)
Looking to capitalise on copper demand, the government has committed to enormous increases in output, as a strategy to rapidly develop Zambia’s economy through increased export trade and local employment. President Hichilema has set Zambia the target of more than tripling its copper production over the space of a decade.
Zambia, which produced 800,000 tonnes of copper last year, aims to be producing more than 3 million tonnes by 2032. Kabuswe and the Mining Ministry have brokered a series of contracts designed both to achieve this goal while enriching local populations.
Canadian-based mining company Barrick Gold raised the classification of Zambia’s Lumwana copper mine to ‘Tier One’, signifying reserves of more than 5 million tonnes, in July 2023, after investing more than $4.3 billion into its Zambian sites.
British firm Moxico Resources committed $100 million to expanding the Mimbula Minerals copper leaching plant this March, creating 900 new jobs and maximising the efficiency of some of Zambia’s largest mines in the process. Mimbula is expecting to increase its extraction rate by more than five times its current output.
In December 2022, President Hichilema announced an agreement worth $150 million with KoBold Metals, a US-based artificial intelligence firm, to explore and develop the vast underground deposits of Mingomba mines, estimated to contain 246 million tonnes of copper and cobalt ore at a grade six times higher than that found in Chile, currently the world’s top copper producing nation.
Mingomba copper mine, where KoBold metals has begun to explore underground deposits. (Mining for Zambia)
Zambia is not just expanding its contribution to the green revolution; the country has also been brokering bilateral deals to accelerate its own transition to renewable energy. These deals intend to expand and diversify the renewable energy self-sufficiency of Zambia, which currently relies on hydropower for 80% of its energy.
In February, President Hichilema and a UK energy commission finalised a $2 billion green energy joint ventures agreement, designed to drive sustainable economic growth, known as the Green Growth Compact. Two months later, Abu Dhabi renewable energy firm Masdar signed a joint venture agreement with ZESCO, Zambia’s state owned power company, to develop solar energy capacity worth $2 billion in Zambia.