Zambia Threatens to Suspend CNMC Mine License on Output Halt

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Zambia, Africa’s second-biggest copper producer, will suspend the mining license of CNMC Luanshya Copper Mines Plc if the company doesn’t reverse a decision to halt production at one of its biggest mines, government spokesman Chishimba Kambwili said.

“We have options that we can take as government and one of the options is to suspend their mining license,” he said in an interview on state television. “If they don’t follow the procedure there are options for government to invoke. We shall invoke the provisions of the law and suspend their entire mining operation.”

CNMC, owned by China Nonferrous Metals Company Ltd., said Sept. 7 it would place its Baluba mine under care and maintenance from the next day because of higher costs, lower copper prices and a power shortage. It sent over 1,600 workers on leave as a result. The company didn’t follow procedures and acted “illegally”, said Kambwili, who’s also information minister.

A spokesman for CNMC Luanshya declined to comment on Kambwili’s remarks when contacted by e-mail. The company followed procedure in suspending the Baluba mine and did so to prevent the operation from economic failure within three months, it said in a Sept. 11. statement.

‘Law-Abiding’

“This decision was therefore arrived at in order to save the entire Luanshya mine from total collapse,” the company said in the statement. “As a law-abiding corporate citizen, we have always followed the Zambian laws and regulations.”

Mines in Zambia face copper prices that fell this year to the lowest levels since 2009 as economic growth slows in China, the biggest consumer of the metal. Zambia also has a power deficit amid falling water levels in the hydropower stations it relies on for nearly all electricity generation.

Glencore Plc is yet to inform government of its decision to suspend operations at Mopani Copper Mines Plc in Zambia, Kambwili said.

“If they want to suspend their operations, indeed they will write to us,” he said. “As far as we’re concerned there is nothing going to happen at Mopani until we are written to. The position of government is that that is speculation.”

The production halts at Mopani and Baluba will cut economic growth, export proceeds and royalties, Zuzana Brixiova, an analyst at Moody’s in London, said in an e-mailed note to clients Monday. That will weigh on Zambia’s “increasingly precarious fiscal and external positions,” she said.

Former Zambian President Michael Sata in 2013 threatened to withdraw the mining license of Vedanta Resources Plc’s local unit after the company said it would fire more than 1,500 workers at Konkola Copper Mines Plc. The government later revoked the work permit of Kishore Kumar, who was chief executive at the time.

President Edgar Lungu, who became the leader of Sata’s Patriotic Front party after his death and won the January presidential elections, said in February that the government would take over Barrick Gold Corp.’s Lumwana mine if the company proceeded to halt production and fire workers. Barrick abandoned the plans after government backed down on a royalties-based tax regime introduced this year.

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