Konkola Copper Mines Brochure - October 2015

Zambia’s Fifty-Year Copper Future

Zambia’s Fifty-Year Copper Future Written by: John O’Hanlon Produced by: Kiron Chavda

3

KONKOLA COPPER MINES PLC

The bold decision was made to go below with the objective of expanding the production of copper ore at the Konkola mine

Following $3 billion of investment by its majority shareholder, Vedanta and from internal resources, Konkola Copper Mines plc (KCM) wants to extend profitable operation for at least half a century: CEO Steven Din tells us how

4

Z

ambia has been heavily dependent on copper for decades, and its Copperbelt is probably still the best-known deposit.

Today the country is internationally recognised as a premier producer of this product, and is ranked as the world’s eighth lar gest producer of copper. One of the largest mining operations in the country is the Konkola Copper Mines plc (KCM). Indeed KCM is the largest integrated copper producer in Zambia. It is a subsidiary of Vedanta Resources, a company with its roots in India, though now headquartered in London where it is listed on the LSE. KCM produces finished copper in cathode form which is then sold on the London Metal Exchange (LME). “That is what differentiates us” explained

MINING

Steven Din, the company’s CEO. “Many other operations in Zambia don’t take production all the way from the mine to the finished product.”

This was Vedanta’s vision when in November 2004, it became the majority shareholder in KCM, increasing its share to nearly 80 percent in 2008.

Over this period, Vedanta invested close to $3 billion, with part of the financing raised by KCM to realise that vision, installing assets that included a state of the art smelter with a capacity of 311,000 tonnes per annum (tpa) and t hree concentrators (two at the Nchanga mine in Chingola and one at Konkola mine in Chililabombwe) with a combined concentrating capacity of 15.5 million tonnes.

When Steven Din took over the leadership of the mine in May 2014, he faced a much changed market for the mine’s products. It’s well known that there had been a slump in world copper prices, and that many projects were stalled or mothballed. However that is a short-term situation, and with the big investments out of the way, KCM was much better placed than most of its peers.

Din took the long view. “We are building our vision for the next 50-100 years around the Konkola ore body.” With the open pit at Nchanga virtually mined out, the bold decision was made to go below with the objective of expanding the production of copper ore at the Konkola mine from two million tonnes per annum to 7.5 million tonnes per annum by accessing the rich ore body that lies below. To achieve this the company sank

16,000

Number of staff employed

by Konkola Copper Mines

w w w. k c m . c o . z m

5

KONKOLA COPPER MINES PLC

“Last year we mined just under 1.5 million tonnes of ore and this year we expect over 2 million tonnes” – Steven Din, CEO

6

a new mine shaft to a depth of 1,500 metres, making it the deepest new shaft sinking project in Africa. The Konkola Deep Mine Project (KDMP) started to bring copper ore from its mid-level in 2010 and from the bottom of the shaft in 2014.

Now the deep mine is ramping up to full production, he said. “Last year we mined just under 1.5 million tonnes of ore and this year we expect over 2 million tonnes.” It’s a busy place with 6,000 people working there. Apart from extracting ore, this mine has the distinction of being one of the wettest mines in the world, and every day 350,000 cubic metres of water is pumped out into settlement beds for purification, and then to the Kafue River. This is equivalent to

MINING

the volume of water consumed daily by the 3.5 million populace of Zambia’s capital city Lusaka.

The turnaround of KCM from a high volume, low cost mining operation to a long term sustainable business is well under way, with a new management team in place. Knowing the surface deposits were almost exhausted, when Vedanta came to Zambia 10 years ago it had the foresight to assess the Konkola ore body for the next 50100 years, building the assets and investing for the future, Din said. “The main thing we have been able to achieve over the past year is that we have been able to take away some of the complexity associated with moving from the legacy operation into a new construction and operation phase.”

Konkola’s Deeps headgear and conveyor. The turnaround of KCM from a high volume, low cost mining operation to a sustainable business is well underway

w w w. c o m p a n y u r l . c o m

7

KCM’s Nchanga smelter, part of its operations as the largest integrated copper producer in Zambia

8

Under his watch, three distinct business units have been set up. One is the Konkola mine and its surface facilities (the six million tonne capacity concentrator was built to accompany the 1.5 kilometre deep shaft and the backfill plant unit).

Another is the new smelter at Nchanga, together with the Nkana refinery. “We decided this should be operated independently: to the extent that we are unable to fill the smelter with ore mined from our own captive mines we will buy concentrate of appropriate grades on the market,� he explained.

The third unit comprises the Nchanga operations, including a profitable reclamation business. The cheapest copper KCM is currently producing is from the old tailings, in which there remains a significant amount of metal.

MINING

This is being extracted using a leach process, solvent extraction and electrowinning.

Each of those businesses thus has a different profile. “By setting them up separately under dedicated leadership, we have given them a lot of discipline and focus into how they should be managed today and into the future.”

So most of his first year was spent in setting this new direction and aligning 16,000 employees into a new vision. The next phase, he said, will be one of systematisation, through IT and through human capital. “We are very much focused at present on our people, identifying talent, getting the right talent in the right place, the right skills in the key areas and making sure people are communicated to effectively and rewarded as they expect, both in terms of pay and in career development.”

Energy is a big issue in the Copperbelt, where all the operators struggle to cope with erratic, and increasingly expensive, supply from an over-stretched national grid. Now there is a suggestion that load shedding, planned outages, will be introduced. KCM has a very large (220MW) energy requirement to keep its mining, smelting, beneficiation and dewatering operations going continuously, and is the largest power user in the country. It has diesel generation, 24MW at Konkola mine in Chililabombwe and a further 10MW at Nchanga, that can be brought into use if there’s a power cut. But backup power is expensive power.

Vedanta’s portfolio includes 9,000 MW of

“We have been able to take away some of the complexity associated with moving from the legacy operation into a new construction and operation phase” – Steven Din, CEO

w w w. k c m . c o . z m

9

KONKOLA COPPER MINES PLC

Konkola’s new East mill concentrator

baseload generation in India, so it made sense to start looking at the possibility of utilising coal deposits in the area. It might make good sense to build a power station that would not only meet its own needs going forward but also generate a surplus that could be offtaken by the national power authority ZESCO. In 2013 KCM started exploration in Sinazongwe near the Zimbabwe border. If the right quantity and quality is established it hopes to build a power station to generate as much as 300 megawatts and transmit it on the network that currently feeds the Copperbelt from the Kariba generation on the Zambezi.

Steel & Iron Founders Manufacturers of Grinding Media, Castings, Oxygen, Carbon Dioxide & Acetylene T +260 212 213933 / 213946 / 213541 F +260 212215432 sales.scaw@iconnect.zm P.O. Box 20418 • Kitwe • Zambia • Plot 1316 Dr Aggery Ave. Industrial Area

MINING

A coal fired power station would benefit the whole country, however in its own backyard KCM is very much more than just a large employer and consumer of goods and services. It supports no fewer than two fully equipped hospitals, eight township clinics and eight mine clinics reaching out to over 63,000 people. That’s in addition to the education system it runs; primary and secondary schools at both Chililabombwe and Chingola, between them serving 2,200 pupils.

Steven Din was very proud of KCM’s community work. “We have upgraded the secondary schools to A-level, because the Zambian education system normally relies on universities to deal with that level of preparation in a foundation course. We wanted to give our students the

Konkola’s concentrator. In 2013 KCM started exploration in Sinazongwe, near the Zimbabwe boarder

w w w. k c m . c o . z m

11

KONKOLA COPPER MINES PLC

Trucking is nowhere as efficient as rail for bulk transport

12

opportunity to go abroad for tertiary education, and for that they need an entry qualification that’s recognised internationally. We have previously sent 42 students to India, South Africa or Namibia studying mainly engineering and medicine.”

This energetic CEO is now finding time to revive a former Vedanta policy that has stagnated – getting group companies to second some of their top trainers to Zambia to assist with technical training. “We also want to send Zambians out to our Indian operations.”

What else would he like to do? Well he’s working with government and Zambia Railways Limited (ZRL) to reintroduce the benefits of the old inter-mine system that used to

MINING

link the mines and carry ore to the coast at Dar es Salaam. Trucking is nowhere near as efficient as rail for bulk transport.

But his number one priority is safety. Things were not going well, so following a number of fatalities, in November last year KCM launched The Chachilamo safety initiative. Chachilamo means ‘enough is enough,’ in the local language and it aims to entrench a culture of safety awareness and to introduce practical safety standards to the company’s 16,000 employees. “That really inspired the workforce,” he enthused. “It includes all the contractors and the Mines Safety Department too, and we decided to make it a highly visual campaign.”

Chachilamo was featured on TV, to popular acclaim, but he still wasn’t satisfied. “We have 100 people working in safety already, but we said we need to take 20 of the best people out of the business and turn them into Chachilamo champions; that was difficult, precisely because they were the best guys!” The Chachilamo champions were taught mentoring skills and set about spreading the safety message in the mines. Shortly, however, they came back and said that teams would be more effective than individuals, so each was given a further five people. Now there are 120 safety ‘evangelists’ throughout the business, workplace mentoring as they do their regular jobs. It has, he says with satisfaction, made a big difference to the company’s safety record this year.

Company Information INDUSTRY

Copper Mining HEADQUARTERS

Chingola, Zambia FOUNDED

1957 EMPLOYEES

16,000 REVENUE

Not Disclosed PRODUCTS/ SERVICES Reclamation, Refining, Smelting, Exploration

w w w. k c m . c o . z m

13

Fern Avenue, Chingola, Copperbelt, Zambia 10101 T +260-212-352880 / F +260-212-351225 www.kcm.co.zm / corporatecommunications@kcm.co.zm