How has production capacity evolved in Zambia over the past year?
Kansanshi, the largest copper mine in Africa, continues to operate efficiently. Sentinel is being commissioned and produced its first concentrate on December 31, 2014, which was ten years to the day since Kansanshi started producing its first concentrate. Commissioning will be complete in 3Q2015, depending on completion of the electricity line that we have constructed between Kalumbila and Lusaka West. Once that is online we will be able run both trains at Sentinel concurrently. Sentinel is an incredible mine and is all about scale.
What makes Sentinel such an efficient, state-of-the-art mine?
It is located in one of the most remote parts of Zambia, which is a landlocked country. Approximately 14,500 trucks of material were required to build the mine, and it has the biggest mills that you will see in operation anywhere in the world. You have to go to Chile to find mills of similar size. We have also striven to build a sustainable community to support the mine, which is one of the aspects of the project that makes it unique. This will also make it sustainable beyond the life of the mine. We have been meticulous in building the infrastructure to underpin the community as it grows and this includes affordable housing for employees along with schools and clinics. We are attracting businesses from around the world to set up there, and have become the major employer within the region, and are set to become a major contributor to the Zambian treasury through tax receipts when we enter commercial operations. Investment in the project so far, which includes the Enterprise nickel mine, stands at $2.1 billion.
What is your assessment of the government's decision regarding mining taxes?
We look for a competitive and stable tax regime in every jurisdiction in which we operate. We understand the politics of Zambia and applaud the President's courage in stepping back from 20% MRT, but to split open-pit and underground mines as if open-pit were low cost and underground high does not accurately describe challenges within the sector, as 9% MRT, 30% corporate tax, and 15% variable profit tax is extremely high. In fact, Zambia remains the highest base metal tax jurisdiction in the world, so we would like to see further movement in this area and we are engaging the government constantly through the Chamber of Mines to try and make Zambia a more competitive tax jurisdiction for investors. The DRC, for example, has had the same tax regime since 2002 and has a mineral royalty of 2.5%. We think there is still work to do and that negotiations and discussions need to continue with the government, with whom our relationship remains close.
How do these issues affect Kansanshi's status as one of the most competitive mines in the world?
With the Kansanshi smelter commissioning progressing so well, we are now producing a significant amount of sulphuric acid which is clearly of great benefit. We remain one of the most efficient, low-cost mines in Africa. Any challenging fiscal situation then makes you take the time to examine your efficiencies with a great deal of scrutiny and then forces you to leverage those efficiencies. The electrical assists on our mining fleet are enabling us to greatly increase productivity in terms of the daily amount of ore that we can produce.
How would you describe the current infrastructure in Zambia for the development of a healthy mining industry?
Zambian infrastructure is improving all the time. The government has invested heavily in road infrastructure. We read a lot about aspirations to improve the railways, and we are supportive of this. An improved rail system in Zambia would benefit the country significantly—remember, Zambia is land-locked. In terms of electricity, we are building over 60km of power lines in partnership with Zesco. Initially this has connected Kansanshi through Lumwana to Kalumbila and provides sufficient power to run the first train at Sentinel. Once the second, longer power line of 545km, is complete running from Lusaka West to Kalumbila, it will complete a ring around Zambia. This will help to flatten out unhelpful power spikes. In any industrial context it will also improve reliability and benefit the country as a whole through rural electrification opportunities in areas where there would be no other means of accessing power. These are all pluses, and we expect that line to be complete within the next few weeks.