On 2 December, six West African heads of state stood up to the IMF at a conference it organised, arguing that development will come to a standstill if the Bretton Woods institutions do not change their approach.
Copperbelt: Two sides of the coin
“The bottom fell out of our world last year,” sighs Trevor Faber, project manager for South Africa’s Metorex at the Ruashi mine in Katanga, Democratic Republic of Congo (DRC). “We have seen signs of a return to normality, but who knows? I’m not sure anyone does.”
Metorex’s experience is typical of mining companies working the Zambian and Congolese Copperbelt. Copper miners now admit that global copper and cobalt demand fell sharply in mid-2008, just as many of their share prices were peaking. Speculative commodity trading kept prices high for a short while longer, but when the credit crunch hit, they collapsed and with them the companies’ share prices.
The industry responded by slashing output, and global copper capacity utilisation in early 2009 was 10% lower than the five-year average. In Zambia, operations at Luanshya closed in December 2008, but national copper production for the first quarter of 2009 was 17% higher than during the same period of 2008 and could reach 600,000 tonnes, a Zambian record, by year-end. Production has risen chiefly because of steadily rising output at Kansanshi and Lumwana.
The impact of the global economic crisis has been worse in Katanga than Zambia; the mining sector has been hit by an opaque, long-running mining contract review by the DRC government and excessive rent-seeking from state agencies. The government recently rescinded a number of taxes, but one mine manager said: “It still costs the same to truck stuff from Lubumbashi to Kitwe just across the Zambian border as from Kitwe to Durban. Congolese officials still do what they like. With all these extra costs, copper at anything under $3,000 per tonne is unsustainable.” Most Katangan mining companies have reduced copper and cobalt production since last year, with several mines put on care and maintenance, while the market for artisanally-mined ore has all but dried up, leaving hundreds of thousands of diggers unemployed.
Despite the difficulties, some companies are making headway. Metorex expects to reach steady annual production levels equivalent to 36,000 tonnes of copper and 3,000 tonnes of cobalt by the end of 2009, but Edward Legg, a senior manager, told The Africa Report: “The markets are not friendly to Congo mining, partly because it’s mining and partly because it’s Congo. We don’t want to go to the bank. We have enough debt already.”
At the massive Tenke Fungurume copper and cobalt deposit near Kolwezi, by contrast, majority-owner Freeport McMoRan of the US is sitting on a mountain of cash, enabling $1.9bn of investment in 2008 and another $1.75bn this year. Copper- cathode production began ahead of schedule in April, and output could eventually reach 450,000 tonnes of copper a year as long as the railway between Kolwezi and Lubumbashi is refurbished. Freeport has not resolved its contract review but insists its existing agreement is legally sound. The DRC government seems unlikely to halt an operation that will create a useful revenue stream at a time when its financial problems are acute. Debt relief from Western donors has been held up by their concerns about a $9bn infrastructure-for-mines agreement between Kinshasa and Chinese companies financed by China’s Exim Bank.