How Can Zambia Improve the Competitiveness of its Mining

Industry and Increase the benefits from Copper?

May 2010Frank RussellSunil Sinha

Supported by the World Bank, DFID, and AfDB

Jobs and Prosperity – Building Zambia’s Competiveness (JPC)

Agenda

Global Prospects for Copper Copper still has much to offer Zambia How Attractive is Zambia for investment? How Competitive is the Zambian

Industry? What role can Mining play in Zambia’s

prosperity? What is needed to realize the Potential?

Strong international demand

1 million tonne p.a. growth =

annual output from

Zambia

Driven by growth and urbanisation in emerging

markets

Source: UK Population Division, Deutsche Bank Research, Global Insight, JP Morgan research

Will cause supply shortfall

Potential for long term Copper price to be high (with short term

volatility)

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 '00 '02 '04 '06 '08 Q109

Q309

Q110

Actual

Real

Qtly Avs Q1 09 – Q1 10

(Annual Averages adjusted by US GDP Deflator 2005 = 100)

Agenda

Global Prospects for Copper

Copper still has much to offer Zambia

How Attractive is Zambia for investment? How Competitive is the Zambian

Industry? What role can Mining play in Zambia’s

prosperity? What is needed to realize the Potential?

Rapid growth, market share recovering

• Copper output at 1970s level-700,000 t/year

• Growing at about 8% a year

• World market share recovering

spcZambian Share of World

Refined Copper Production

0

2

4

6

8

10

%

Source: ICSG; IWCC

Zambia 7th in world copper production, improved from 11th place

Source: Reuters, 2009

Zambia has not maximised mining’s contribution

Major industry, leading growth

Major export > 80% valueBUT

Contribution to revenue low (1%-1.5% GDP) though likely to increase

Employment <50,000 Few supply linkages

Source: ZamStat

Agenda

Global Prospects for Copper Copper still has much to offer Zambia How Attractive is Zambia for

investment? How Competitive is the Zambian

Industry? What role can Mining play in Zambia’s

prosperity? What is needed to realize the Potential?

Mining companies will wish to invest where returns are

highest• Mining companies will invest – new

technology opens up low grade deposits

• Will invest where risk adjusted returns highest:

Good investment environment Competitive industry – investment

decisions made at $4400/t ($ 2/lb) even if prices forecast to remain higher.

Zambia has the copper resources to attract investment

• 6% of world copper resources

• 2.8 billion tonnes resources at existing mines

• Additional resources outside Copperbelt

• 40% of country not surveyed

Will require:– Exploration

investment– New mining

investment– New technology

New resources outside Copperbelt

Mumbwa

Influential industry surveys rank Zambia in bottom third of where to

invest

Zambia ranks 18/25

Closer look at the Behre Dolbear ranking

Economic system

Political

system

Social issues

Permitting delays

Corruption

Currency

stability

Tax regim

e

Total points

Australia

10 9 8 8 10 8 7 60

Chile 9 8 7 7 8 7 4 50

Ghana 6 6 3 7 4 6 6 38

Namibia

5 6 3 5 4 5 6 34

Tanzania

5 5 3 7 3 4 5 32

Zambia 5 4 2 5 3 2 4 25DRC 2 3 3 3 1 1 4 17

Highest score possible is 70, Australia scores highest. Zambia’s score has fallen from previous year