It is reported that Zambia may reinvest the USD 160 million it may earn from the sale of its equity in Lumwana copper mine in North western province in other mining projects.
Dr Situmbeko Musokotwane finance minister of Zanbia said that the government would consider upcoming and the already stock-listed mining companies for investment. We can look at First Quantum which is already listed, KCM which also has plans of listing and all the upcoming mines. These all present an opportunity for us. The ideal thing is to get this money to be reinvested. Buy new shares in a mining company that is our preference.
The government was trying to raise its investment portfolio in ZCCM-IH and make it viable. Zambia Consolidated Copper Mines Investment Holdings Plc known as ZCCM-IH agreed to sell 2.28% stake in Equinox which it holds on behalf of the government. The decision by the mining company is part of the unconditional approval for Barrick’s USD 7.7 billion takeover of the company and the copper producer’s Lumwana mine.
It is Zambia's desire to try to have the investment portfolio for ZCCM-HI keep on improving and not necessarily them running the mine but them buying shareholding in the mining companies. Musokotwane did not however state the time frame the government would make the investments. ZCCM-HI made the investment but as a major stakeholder we have a say and soon we will come up with something.
Dr Musokotwane further said the money from the sale would also be used to settle ZCCM-HI’s debt. Recently Mr Jazzman Chikwakwa deputy mines minister of Zambia stated recently that Zambia Consolidated Copper Mines Investment Holdings is still available venture despite the shortcomings.
Chikwakwa told legislators in Lusaka on June 1st 2011 that the financial position of the company known as ZCCM IH has been on the rise over the years.
This is, despite the company having shed off its 2.28 percent equity in Equinox Minerals Limited after the Toronto listed global miner was sold off to another competitor, Barrick Gold Corporation for a value of USD 7.7 billion. As of December 31st 2010, ZCCM IH earned ZMK 143.3 billion and after tax its net profit was ZMK 91.7 billion. The company’s total assets were worth ZMK 1.3 trillion while total liabilities it inherited from the former owners and conglomerate, Zambia Consolidated Copper Mine was ZMK 2.6 trillion.
Mr Chikwakwa said that the context of ZCCM IH needed to be understood in the context it was formed after the privatization of the mines in the Southern Africa nation. The deputy minister was responding to questions from lawmakers on the financial status of the company by the end of last year and how much money government realized from the ZCCM IH in dividends in 2009 and the following year.
ZCCM passed on the legacy of accumulated losses to ZCCM IH because of undercapitalization and low copper prices which prevailed before the privatization of the mining conglomerate, initially state run and controlled. As a result, ZCCM IH was not declaring dividends to government since its inception because of its financial position in line with the section 84 of the Companies Act Cap 83 of the laws of Zambia.
Under the Act, a company which is in this position, like ZCCM IH cannot declare dividends until accumulated losses are reversed. After months of speculation ZCCM IH officially surrendered the 2.28% equity in Equinox Minerals Limited to Barrick Gold, the Canadian based and leading gold miner after its board of directors accepted the offer to surrender the shares with anticipated earnings of more than USD 160 million.
In an advertised 'cautionary statement' on June 1st 2011, ZCCM IH said it had accepted the offer with projected earnings in excess of US$160 million. ZCCM IH owns a total 2.28% in Lumwana Copper Mines in Zambia and Jabal Sayid in Saudi Arabia as at March 21st 2011. The initial investment for ZCCM IH cost USD 30 million in 2006 and therefore the potential return of investment is in excess of 400 percent during the period 2006 to 2011.
(Filed by Mr Kapembwa Sinkamba SteelGuru Correspondent Zambia)
