Gazing into a crystal ball - Zambian mining in 2008

Happy New Year everyone! Thanks so much for all the support and interest people have shown in MineWatchZambia in its first year. Here's to more of the same in 2008.

I thought this would be as good a moment as any to reflect on a few issues still trotting along in the debate and to speculate on what might happen in the year to come. If I had one wish for the site, it would be that more of you got involved in the discussion by posting comments on the blog, so do let me know what you have thought of the site, and what could be improved over the next year. Just hit 'comment' at the bottom of this post.

My overwhelming feeling is that since the 'For Whom the Windfalls?' report was published last year, everything has changed, and yet nothing has changed. In January Professor John Lungu and I debated the Deputy Minister of Mines at the launch event for the report at the Pamodzi Hotel in Lusaka. What struck me at the time was his relaxed acceptance of the report's criticisms of the impacts of privatisation, and his sense of bewilderment that anyone could really expect the Government to do anything to change the situation.

Since then, I think the tone of the debate in Zambia has changed significantly, with excellent work by trade unions pressing with some success for wage rises in most of the mines, opposition MPs in Parliament piling pressure on the Finance Minister and more good research by civil society groups putting pressure particularly on Vedanta. I hope these developments have contributed to a real sense in the Government, IMF, World Bank and even the companies themselves that they are under pressure to deliver real benefits to workers, communities and the national economy, and that there is an angry public constituency out there waiting to see what happens.

So, everything's changed. But, erm, nothing has.

• We had the false dawn of the revision of the Mines and Minerals Act, which changed the terms of future contracts with mining companies, but not the existing ones. Perhaps it's regrettable that this discussion has taken up so much air-time (including in this blog) with so few concrete developments. The focus of discussions about mining is almost exclusively on the ongoing renegotiation of mineral royalties with the companies holding Development Agreements. This leaves under-discussed questions about Zambia's anti-union labour framework, casualisation in the mines and the inadequacy of health and safety and environmental regulation and practice in the mining houses. A hundred deadlines have been and gone for real news on the re-negotiation. You've got to expect something to happen soon. I wouldn't want to put a date on it. But I will predict a figure: 3% or possibly, even less. I'd like to see a lot more.
  
• There have been regretable and avoidable deaths all through the year in the major mines, but thankfully no major disasters. Stories of accidental environmental pollution continue on a drip-drip (sorry) basis - the MCM story today being justy the latest. At least as serious is the non-emergence of clean technologies at the smelters. Anyone who's tried to take a deep breath in Kankoyo township in Mufulira knows this issue is more than past its sell-by date. There has been talk of significant extra investment in the Mines Safety Department and the Environmental Council of Zambia to encourage the two bodies to grow some teeth. I don't know what's come of this. Maybe in the next year we can all pray for the emergence of an effective regulatory regime for Zambia's mining sector!
  
• The long-running row over ZCI-KCM shares. I blogged about this a month ago, asking readers to help me out understanding what the Government or anyone else's persepctives were on this issue. No comments came! Anyway, MiningMX report today that this issue will be settled by April. "A dispute that started in September 2005 over the value of ZCI’s holding in KCM was resolved in July last year in a ruling by an arbitrator. A bank is now valuing that stake. The arbitrator has decided ZCI’s stake in KCM should be valued as of the date – 12 August 2005 - on which the call option was exercised by Vedanta.
  The bank undertaking the difficult valuation has said it will release its findings in mid-January this year instead of mid-December as originally thought."

This blog came out of research I did on the impacts of the privatisation of ZCCM. As a result I have focused almost exclusively on the seven former-ZCCM copper mines. These are still the biggest actors in the mining sector in Zambia. However, there are a number of significant developments that could shift the focus of the debate a little over the next year.
Among them:

• The huge new Lumwana Mine. There are already 2,500 people working on the construction, and perhaps a little like the original development of the Copperbelt, we are seeing a sociological experiment as whole new towns emerging in the bush to support what is being pushed as Africa's biggest mine, producing four different precious metals. It has been scheduled for some time to come on stream in mid-2008.
• The promise of big new Russian investments in the mining sector. Mr K has left comments on this blog suggesting we should fear the Russians. I don't have a view on this. What do others think? Any better reason to fear the Russians than the other options?
• Huge price rises for cobalt. See recent editions of Resource Investor which argues that this is a trend likely to last. In the last two years, "cobalt first doubled and then plateaued. Now in the last six months of 2007 cobalt prices have gone up another 50% above the base established during the plateau period The total increase in price of cobalt over the last two years has, as of now, been 300%; thus cobalt has been a far better investment during the last two years than either gold or platinum."
• Prospects in uranium too - uranium is enjoying high prices as the debate on global warming increases interest in nuclear energy. According to the Minister of Mines, quoted in Reuters : "A statutory instrument (legislation) will be signed before the end of December. Once we publish the law, we will begin to process applications and ask (more) mining companies to apply for licences,"
• The re-opening of lead mining in Kabwe. The city was listed last year by the Blacksmith Institute as one of the ten most polluted places on earth, as a result of the old mine, and the truly horrible impacts of lead on the human body. This really is a powerful case for the Environmental Council to get its act together.
  

So, readers, what do you expect to happen in 2008? Let's have the debate. Maybe I'll give a prize this time next year for the most accurate prediction.

Have a great year!

Alastair