"Things like electricity tariffs, the ability to issue employment permits to limited numbers of critical expat workers, and access to a competitive market for consumables such as low-sulphur gas-oil — of which we consume around 500,000 liters a day, are of great influence to Zambia’s attractiveness."

John Gladston

GOVERNMENT AFFAIRS MANAGER, FIRST QUANTUM MINERALS (FQM)

August 16, 2018

Can you highlight any recent milestones that FQM has achieved and what is your outlook for Zambia's ambitious copper production objectives this year?

We firmly believe that Zambia has every prospect of reclaiming its place as the number one copper producer in Africa. The principles that will underpin this are stability and competitiveness, but not just in terms of the mining tax regime. Things like electricity tariffs, the ability to issue employment permits to limited numbers of critical expat workers, and access to a competitive market for consumables such as low-sulphur gas-oil — of which we consume around 500,000 liters a day, are of great influence to Zambia’s attractiveness.  All these are expensive overheads and we need assurances that we can source those critical commodities at a competitive price. If Zambia were to provide these enduring assurances we would see a huge expansion of the mining sector: it would attract a great deal of new investment. It would also help to diversify away from mining because those benefits spread to other sectors as well.

The government is looking to diversify across several different industries. How does FQM support this initiative?

Our multi-facility economic zones (MFEZ) Kalumbila, and hopefully in due course Kabitaka, will speak to all those aspects of the government's desire to diversify industry in the country. More than that, these initiatives will generate jobs and tax payments that will become government revenue, increasing the general wealth of the nation. I am optimistic that the government will show courage and endorse these commercial zones. Where we have sited them, we have also constructed a town next to each MFEZ that will help to support their success by providing a stable supply of workers. All of these initiatives are geared towards creating sustainable communities around our mines so that when the orebody expires, the community there will persist; at the end-of-life of each mine we do not want to see any community collapse in on itself.

How has the power conversation evolved in Zambia since the crippling deficit that severely impacted the mining industry a few years ago?

There are many opinions and narratives about what caused the power problems Zambia experienced a few years ago. Power is such a critical component to a successful business, which again plays into the tariff debate and subsequent competitiveness of Zambia as an investment destination. Looking forward, we believe that competitiveness should be embodied in a cost-reflective electricity tariff. The only way to determine a cost-effective tariff is to carry out an independent cost of service study; this independent study is yet to be delivered. Clearly any cost reflective tariff will be heavily influenced downwards by the reform of the Zambian electricity utility ZESCO. In the meantime, we will continue our dialogue with government, but we must also make allowance for existing power agreements. We believe there are existing inefficiencies in the power sector which can be easily rectified; of course, we are prepared to support government in implementing these reforms.

What opportunity do you see for private players to play a greater role in the power sector?

We do not want to see private energy producers pitch themselves at “emergency tariff” levels as we have seen over recent years, with the default position that mines should be responsible for the financing. However, we need to see the de-regulation of the sector to force efficiencies  and so allow the markets to become competitive.   This would see various power producers competing among themselves to drive prices down. We would like to see de-regulation to the extent that any industrial corporation is at liberty to negotiate the import of their own power from external bodies, such as other producers and utilities within the Southern African Power Pool (SAPP) eg Eskom. 

What opportunities do you see for the southern African nations to create more synergies in support of the development of their respective mining industries?

We consume such huge quantities of Low Sulphur Gasoil, and we need oil marketing companies to be allowed to compete with one another to import high quality, SADC duty-exempt and compliant products from around the region.  The regulatory structures for this trade arrangement already exist within SADC.  Once again, a free-market level-playing field will drive prices down and increase Zambia’s competitiveness. To not comply with existing SADC protocols will have quite the reverse effect.

Can you provide an update on the strategy in place for the Enterprise nickel project?

The nickel price is recovering, but we have not yet seen the stability nor the price-point which warrants the commissioning of this project. This is also the case for our nickel asset in Australia, which remains under care and maintenance.  In the meantime, we are still exploiting the synergies available at Enterprise with respect to the Sentinel project.

What is the vision for FQM heading into 2019 and how important will the company's Zambian assets remain in its global strategy?

In 2019, the Cobra Panama project will come online with its own coal-powered power station already generating electricity into the Panamanian grid. Latterly we have seen FQM pivot towards Latin America and expect that trend to continue in the coming years. However, Zambia remains important to FQM; it will be for the foreseeable future. Our roots are in Zambia and as a company we are extremely proud of our African heritage.

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