With His Excellency President Hakainde Hichilema’s drive for a New Dawn for Mining in Zambia, ZCCM-IH – which holds stakes in many of the country’s mining operations – appears to have entered a new and dynamic phase. Mining For Zambia met up with the company’s recently appointed Board Chair, Ms. Dolika Banda, at last month’s Mining Indaba in Cape Town to find out more about its vision for the future.
While it sounds like you’ve been thrown into the deep end to some extent, you also seem to have embraced the challenges that come with your new role.
It’s certainly a very exciting role, yes. There are 24 companies in ZCCM-IH’s portfolio, and only two of them have consistently paid us a dividend: Copperbelt Energy Corporation and Kansanshi Mining Plc. My day-to-day job is essentially sorting out this portfolio and I’m enjoying it because it’s taking me back to my banking days – and especially my days at IFC and CDC because often in the impact investing space, you’re working with challenging countries and the most difficult sectors. So that experience has served me well.
Strategically, ZCCM-IH is gearing towards managing a financially and socially sustainable mining-focused investment holding company. Our corporate vision is to eventually be a best-in-class global mining and mining-related holding company. In order to do that, we have had to go into the portfolio and really analyse what a mining portfolio should look like so that if somebody wants a unit piece of Zambia’s mining industry – but they don’t want to buy a direct stake in a mine – they can clearly see that ZCCM-IH is a mining conglomerate.
What are some of the challenges when it comes to ZCCM-IH’s mining-related portfolio in particular?
Over the last few years, there has been a complete shutdown of investments by good investors coming into the country, so many of our investee companies have been starved of much-needed finance. This lack of working capital has been a big problem. We’ve faced strained relationships – and even litigation, which is public knowledge – with various mining houses, so it’s constantly been about putting out fires. I can tell you for a fact that any investor who is unsure about a country’s fiscal stability and policy consistency will not dip into their pockets, take a billion dollars and put it into that country. Instead, they park the capital and wait, or deploy it elsewhere.
Now, one of our biggest challenges is to reset all of that, and reset it quickly enough that the money starts to come in and Zambia can start to ride the wave of opportunity that mining – and the green energy transition in particular – presents. The recent announcement of $1.35 billion in investment from First Quantum is the result of a series of conversations over the last eight months, starting from when this administration came into force. Since I took my position in December 2021, this gained momentum so that we were able to come to the Mining Indaba and tell the world the story that Zambia is open for business.
“Over the last few years, there has been a complete shutdown of investments into the country. It’s constantly been about putting out fires. Now, one of our biggest challenges is to reset all of that.”
Zambia has certainly been in the spotlight at the Mining Indaba, and FQM’s new $1.35 billion investment has played a big role in that. Do you feel that Zambia has turned a corner?
During the keynote speech given on Monday [9 May] by His Excellency President Hakainde Hichilema – ‘A New Dawn for Zambia’s Mining Sector’ – he unpacked his vision for the country’s mining sector, including the ambitious target of three million metric tonnes (or approximately $30 billion dollars’ worth of copper) by 2030. This is a target that will require deep pockets to achieve. To sink a shaft takes billions of dollars. Zambia’s expected GDP for 2021 is $24 billion. Clearly, Zambia cannot mine all of these minerals from its treasury. There’s no way we can do mining without partnerships on the mining capacity and financing fronts, and we need good international investors to partner with us.
The announcement of FQM’s new investment during Indaba week was the greatest news signalling this renewed investor confidence. I think the mantra is true: It is, indeed, a new dawn for our country.
“The announcement of FQM’s new investment during Indaba week was the greatest news signalling this renewed investor confidence. I think the mantra is true: It is, indeed, a new dawn for our country.”
How will FQM’s investment benefit Zambia and Zambians?
In terms of direct effects of this investment, obviously we’re going to see this in terms of jobs created – and we’re talking about high quality jobs. Very soon, we will start seeing the economic activity that will be triggered by an investment of this size.
FQM also already supports health and education in a big way, and that kind of support and social investment is expected to increase. We are also in discussions with the company about how they can help Government in terms of road infrastructure. Our President has been very clear that the mining sector must be an inclusive sector, such that Zambians feel a sense of ownership, however we structure that.
The value chain surrounding the mining sector is equally important. This extends to local input in the supply chain, working with local SMEs – but also beneficiation. There’s so much that goes into mining that need not be brought in from abroad. So, how do we start making nails or bolts in Zambia? And then, on another level, why are we exporting raw copper, which then comes back to us in the form of inputs into pipes, cables, and whatever it is that we need? Looking at how Zambia can add value is part of the President’s vision, and that’s how we intend to bring the Zambian people into the mining sector.
That brings me to one of the longer-term effects of FQM’s investment. While this capital will be used to expand Kansanshi’s operations and smelter, and to bring Enterprise Nickel Mine online, FQM is also helping to diversify Zambia’s energy dependence in the mining sector by building a solar park which will eventually power its mining operations entirely. Hydro-electric power is all good and well but, with drought and climate change, it’s a little risky in the long term. So, apart from being a really significant investment into our mining sector, this is a major signal that Zambia cares about clean, green, sustainable energy, and this investment is also our way of showing that we are headed in this direction.
The steps that FQM is enabling Zambia to take in the green energy space are also strongly aligned with ZCCM-IH’s investment strategy, one aspect of which is building a resilient and sustainable portfolio anchored on Environmental, Social and Governance (ESG) standards.
Would you please share a bit about ZCCM-IH’s direction of travel in the next few years?
Certainly. Our direction of travel is anchored on three strategic pillars. Firstly, there’s mineral diversification which, among other things, will require us to ramp up exploration into minerals such as gold, copper, manganese and zinc in order to find the mineral reserves where we can build the next generation of mines. The second is value addition and beneficiation of minerals, gemstones and precious metals, which I mentioned earlier. The third pillar is creating – and, indeed, maximising – value for our shareholders, and ensuring they get a return on their investments. One of the ways we’re doing this is by adopting best practices to find new – and, crucially, predictable and consistent – revenue streams for shareholders.
“Our direction of travel is anchored on three strategic pillars, one of which is creating – and, indeed, maximising – value for our shareholders.”
You mentioned the connection between the Government’s focus on mineral diversification, and the need to ramp up mineral exploration. Is exploration something that ZCCM-IH is currently involved in?
Yes, ZCCM-IH is engaged in mineral exploration – especially for the ‘new age minerals’, if I can call them that (meaning nickel, cobalt and possibly lithium) – but we’re also encouraging all of our mining partners to invest in exploration of these metals. It can take 10 years from the time that exploration begins and a newly-built mine is actually productive, so we need new mines to come online without delay.
Mineral exploration is expensive and high-risk because, without proper geophysical data, explorers don’t know exactly where to look before they stand a chance of finding the next Sentinel. That’s why geologists say that an up-to-date national geophysical survey of Zambia is urgently needed.
Absolutely. As we speak, our Ministry of Mines has set this as a time-critical deliverable. It’s an area of immediate and urgent focus for us. Fortunately, there’s also a lot of donor money available to potentially fund the creation of an updated national geophysical survey.
The third of ZCCM-IH’s pillars you mentioned is “creating value for shareholders, and ensuring they get a return on their investments”. This area of focus seems like one of several good reasons to ensure that it’s Zambia’s – not another country’s – critical minerals that are used in the green energy revolution. What do you think Zambia should be doing to realise this goal?
One of Zambia’s advantages is that we already have a very well-established mining industry. Even though productivity has gone down in recent years, mines like Kansanshi have continued running all along. The most urgent thing that needs to happen immediately is getting capital into the mines again to get them running at full capacity. We can look at this as a blood transfusion of sorts – that’s what’s needed in the immediate term.
We have to relook at our mining policy, too, which has already begun. But truly, if there’s one thing I can say, it’s ‘Get cash into the system and get the productivity up again.’
Look at Mopani Mining Plc, which was run by Glencore: they put in some really state-of-the-art machinery; now we need to ramp up production again. How we can get more capital into Mopani, a 100% ZCCM-IH owned company, is an ongoing conversation. We don’t yet know what the shareholding structure will look like when we do, but we are open to good partners who are going to be in Zambia for the long term.
It seems clear that Government’s relationship with the mining sector has evolved since the new administration came to power.
Definitely, there’s been a 180 degree turn, things have changed completely. There wasn’t a lot of communication previously and, I’m no politician, but there was a lot of heavy handedness in the recent past. The current administration sees the value of doing things the right way.
How would you describe ZCCM-IH’s relationship with FQM, which is one of your key ‘mining partners’?
Although we are a minority shareholder in Kansanshi, with FQM holding a majority stake, we are in communication all the time. I would describe our relationship as an ‘open dialogue’. The same goes for Glencore. We speak virtually every day – we don’t wait for an event like a Mining Indaba! These companies are very hands-on with their assets. We now have a changed and healthy relationship with our partners under the new administration.
Here at the Mining Indaba, FQM’s investment has galvanised people’s curiosity in the country, causing them to ask, ‘How can we be part of this conversation?’ It’s driven home the message that Zambia is open for business. The investment has drawn attention to the fact that Zambia can overcome challenges or hurdles with partner investors – not just in the mining sector, but anywhere. It also sends the message that we are looking to partner with global investors – not just on a transactional basis, but on a long-term basis, as partners in development.