KONKOLA Copper Mines says the country needs to start preparing for the reality that current continued fall in international copper price will negatively affect Zambia including reduced revenues for the Treasury.
Director for strategy and business development Brad Gnanasivan, however, said the local mining sector is currently in a better position to deal with low international copper prices than they did during the economic crisis of 2009.
Gnanasivan said the continued “worrying” fall and “uncertainty” in international copper prices will see mining firms focus on reducing production costs.
“There are some degrees of uncertainty with where the Chinese economic growth is going,” Gnanasivan told journalists during a KCM-sponsored media workshop in Lusaka yesterday. “And if the Chinese demand continue to trend downwards as the case in the last two quarters, then the demand for copper will reduce and that means prices might trend downwards a little further. So, it’s a reality we all have to live with and have to prepare for.”
Gnanasivan said there was need for a positive environment in the country to mitigate the likely negative effects of price fall on the operations of mining companies.
He was, however, pessimistic the current fall in metal prices would hurt the mining sector in a manner that mirrors the crisis of 2008 when copper prices dipped below US$2,800 per metric tonne resulting in mining firms shutting down many operations and laying off workers in the process.
“The good thing is that we have been there before periods of low copper prices. It’s not something that is new to us,” he said. “Only that we all have to understand what that will be in terms availability of foreign exchange earnings and that might translate into less tax revenues for the country.”
Gnanasivan said with the current copper price averaging US$7,250 per metric tonne and indications of further declining, KCM would continue exploring way of reducing its operation costs.
Gnanasivan said the price of above US$7,500 per metric would enabled KCM to operate sustainably as it was a high production cost mine.
“It’s very worrisome that if copper prices continue to go further down, then we have to end up to take some measures to address the reduction in prices because what decisions you make when copper prices are sustainably above US $7, 500 to US $8, 000 per metric tonne is not what you do when its below US $7,000 per metric tonne,” said Gnanasivan.
Last June, KCM was forced, by the government, to shelve plans to lay off 2,000 of its almost 20,000 workers amidst rising operation costs and declining international copper prices