MAC: Mines and Communities

Africa update

Published by MAC on 2007-08-31

Africa update

31st August 2007

Camec plunges as mining licence is revoked

By Danny Fortson, The Independent

31st August 2007

A top legal official in the Democratic Republic of Congo withdrew a key licence held by Camec, the mining group run by the former England cricketer Phil Edmonds, a day after the company launched a hostile all-share takeover of its rival Katanga Mining.

The revocation led to a precipitous 24 per cent drop in Camec's stock, endangering the all-share offer for its rival. Camec said it was not officially informed of the cancellation, which was enacted by procurator general Tshimanga Mukeba, and questioned its validity.

The chief executive, Andrew Groves, said: "There is no legal basis for the removal of any of our licences in the DRC. This is clearly an attempt to destabilise Camec's share price in relation to our offer for Katanga, which was announced yesterday. We are confident this strategy to undermine the transaction will fail."

When the bid was announced on 29 August it was worth £715m, but it has taken a severe hit since Camec went public with the deal. The transaction would create the world's largest cobalt producer. It would also have significant copper operations.

Arthur Ditto, the chief executive of the Canada-listed miner [Katanga Mining], spoke out publicly against the offer and suggested that other mining groups were interested in Katanga. Nikanor, a copper and cobalt miner incorporated in the Isle of Man is thought to be the most likely candidate. Victor Kasongo, the DRC's deputy mines minister, has also made his opposition to the tie-up known. Katanga has advised shareholders to refrain from any decisions until it makes it official recommendation in the next two weeks.

Under DRC mining regulations, companies must be given a month notice before a licence revocation, as well as the opportunity to rectify the situation before it is cancelled. Camec said it was given neither. Mr Mukeba said that the license in question would be returned to Gecamines, the state-run copper miner.

The government launched a formal review into the mining sector this year to ensure that companies attained contracts lawfully. It is expected to publish its initial findings by the end of September.

Camec owns 22 per cent of Katanga's shares and has secured lock-up agreements from holders of another 32 per cent. Mr Groves said he received assurances that they remained committed to the transaction.

Zambia defers customs duties for foreign miners


20th August 2007

Zambia will defer payments on customs duties in a bid to boost foreign investment in its mining industry, finance minister Ng'andu Magande told Reuters in a weekend interview.

Magande said Zambia's Treasury will defer payments on a 30% customs duty on imported mining equipment for up to one year to give companies a chance to get operations going smoothly and gain profits from copper and cobalt projects. "I can't tax somebody who is not making profits," he said.

The Treasury has said it would raise mineral royalties to 3% from 0,6% and corporate tax to 35% from the current 30%t for mining companies following a rise in global metals prices.

Magande said negotiations on royalties, which were scheduled to start in September because Zambia was hiring foreign consultants on the talks. "We should be able to start this process by the end of September or October. Everybody thinks that perhaps within three months we should be through with the negotiations," he said.

Copper mining earns the bulk of Zambia's foreign exchange but analysts say the country does not reap enough benefits becaue the mines are owned by foreigners. He noted there was no fresh investment from new foreign companies but that existing projects were expected to raise output.

"Most of the big companies that have already had (investment) plans are saying to us that the highest curve of investments is this year and then next year we will see production coming up," said Magande.

Foreign firms operating in Zambia include London-based Vedanta Resources Plc, Canada's First Quantum Minerals, Swiss firm Glencore International AG and Australia's Equinox Minerals Ltd.

Most of Zambia's big copper mines are majority-owned by foreign firms, with the government holding no more than a 14 percent stake in any one venture.

Zambia forecasts finished copper output to hit 670 000 t in 2007 from 515 000 t the previous year.

Africa's most toxic town

By Yvonne Ndege in Kabwe, Zambia

Al Jazeera

27th August 2007

Al Jazeera's Yvonne Ndege travelled to Kabwe, about 150km north of the capital, Lusaka, and filed this report.

Abandoned by industry in 1994, former workers still come to Kabwe in search of lead and other metals to sell, to scrape a living.

Alex, a father of four has been working here illegally for years. He thinks he already has lead poisoning and that, eventually, it will kill him.

"It's dangerous," he said. "But its just to help our family to survive." Mines in Kabwe were built and operated without health and safety concerns or environmental regulation. As a result, Zambia's people are now facing the consequences.

Families in the area have been warned not to drink water from wells in their garden.

The father one family, Chungu Julius, said that residents are forced to ignore the warnings because water is in short supply.

He said his daughter has memory loss - a symptom of lead poisoning.

"You will tell her to do something, just a short time, [but] she forgets," he said.

"[We] send her to the market to buy some food, [but] she will easily forget the type of food you have sent her to buy. This is when we came to know that lead was working in our children".

Root cause

More than 100 people visit Kabwe's main clinic complaining of sickness every day, but the town has no facilities to test for lead poisoning.

Dr Sylvester Chaseta, who works at the Railway Clinic in Kabwe, said: "The worry is that if people are not aware of lead poisoning it means the problem will go unnoticed and that we will see people dying without knowing the major cause.

"We might think it is HIV, malaria or other things and you forget about the root cause of it all."

The people of Kabwe are only now starting to realise the potential impact that lead poisoning might have on their health.

The Zambian government has initiated a poster campaign to alert people to the dangers.

However, environmentalists have said it is not enough.

They have demanded that Anglo American, the former owner of Kabwe's mine, and the Zambian government give financial compensation.

Peter Sinkamba, from Citizens for a Better Environment, in Zambia, said: "We need in the tune of $28m to adequately address the problem of Kabwe.

"But what is not correct, not morally correct, is for Anglo to run away from this problem which they created.

"They made their money from Kabwe where there is a huge, huge problem.'' *

* MAC Editorial note: The Kabwe lead and zinc operations were closed in 1994. They were controlled by ZCCM (Zambia Consolidated Copper Mines), then state-owned, but with Anglo American holding just over 27% of the equity. Following privatisation of ZCCM in March 2000, Anglo American, through its subsidiary ZCI, continued to hold investment in the Kabwe operations, as well as assuming control of Konkola Copper Mines (KCM). But, in January 2002, Anglo American essentially pulled out of the country; two years later KCM was taken over by Vedanta Resources plc.

At the end of 2002, a set of Environmental Management Plans were agreed for implementation between ZCCM-IH (International Holdings), the World Bank and Germany's GTZ (development agency) to try to cope with the vast legacy of environmental pollution in the Zambian Copperbelt (which also covered the Kabwe operations). The agreement stated that : "From an operational perspective, ZCCM-IH will be in perpetuity responsible for managing the environmental liabilities accrued during the years before privatization." Since ZCCM-IH is majority owned by the Zambian state, and Anglo American has no known involvement in it, prospects of bringing Anglo to book with regards to the calamity at the Kabwe seem very remote.

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