Gold Exploitation In Zambia And The ZCCM-IH PLC Partnerships. Chris Phiri | May 24, 2020 | No comments Lusaka – 24th May, 2020.
There have been concerns from various stakeholders on what the Zambian Government position is in relation to Gold and the partnerships ZCCM Investments Holdings Plc has entered into with Karma Limited and other stakeholders.
The following is the explanation on the various aspects raised as concerns by the public and the Ministry position on the matters.
1. Government Policy On Gold And The Steps Taken.
Zambia is endowed with gold resources and the government remains committed to ensuring Gold benefits the people of Zambia. Government has declared gold as a Strategic Mineral meant to allow all citizens benefit from its exploitation. This means gold must be differently handled compared to other Minerals in the country. In that vein, ZCCM-IH Plc has been mandated to coordinate efforts to purchase the gold from Artisanal miners and to also coordinate the gold trading business in Zambia. ZCCM-IH Plc has also been tasked to partner with players in the sector (Small and Large Scale mining licence holders) to promote more gold mining. So far ZCCM-IH Plc has been establishing gold trading centres, which would afford the Artisanal Gold Miners an opportunity to sale their gold and the Ministry is involved in the fomalisation of the small scale and artisanal sector, to empower Citizens.
The Government Policy and the law i.e. the Mines and Minerals Development Act No. 11 of 2015, is that licences can be given to both Zambians and non- Zambians except for Artisanal Licences that are reserved exclusively for Zambian Citizens. This policy has consistently been followed from the time that the Mine Privatization Policy was adopted in 1991.
This means some licences are owned by foreigners, others jointly owned by Zambians and Foreigners while others are owned by Zambians only. Almost 92% of all licences in Zambia are owned by Zambians. The government policy in mining is to encourage both Local and Foreign Direct Investment (FDI) in the sector. Mining requires huge capital investment which prompts licence holders to borrow from Banks and other investors. Licence holders are free to use any lawful source of capital available to them to achieve the licence conditions.
Government has not said that Gold will Exclusively be mined, processed and handled by Zambians only or ZCCM-IH Plc only: Instead the Policy is to ensure that all gold from Artisanal miners is bought through ZCCM-IH Plc to Bank of Zambia to build our strategic reserves as a nation. The Policy also tasks ZCCM-IH Plc to be involved in the opening of new gold mines at small and large scale levels, hence the involvement in Kasenseli in Mwinilunga. The policy does not entail grabbing or expropriating existing gold licences from the holders in favour of ZCCM-IH Plc but rather encourage more gold mines to be established in the country whose gold production would end up with Bank of Zambia. Licence holders are free to partner with ZCCM-IH Plc to exploit the gold resources. This Policy has not been fully realized because the law is yet to be amended to actualize the policy aspirations. This is why Gold producing companies such as Kansanshi Mines Plc are not currently compelled to sell the gold to Bank of Zambia.
This Policy was approved by the Government in October 2019. After the Policy, the legislative changes are required to implement the policy in full because before that, there is no legal basis to compel a mine licence holder to sell the Gold to ZCCM-IH Plc.
In line with the Policy, Cabinet on Wednesday 20th May 2020 approved a proposal from the Minister of Mines and Minerals Development, Hon. Richard Musukwa, MP for the Mines and Minerals Development Act to be amended. The reason for that decision of Cabinet is because there is an acknowledgment that a Policy on Gold alone will not work without the laws and regulations being aligned with the Policy. The amendment to the Act will also look at other gaps in the laws including improving monitoring and evaluation, licencing and other lucunas identified by stakeholders. As a Ministry, we welcome views from Zambians and Stakeholders on how the law can be enhanced to ensure we maximize our benefits as a people from the extractive sector.
As earlier alluded to, Government declared gold as a strategic mineral and that declaration will entail a specific law be prepared that will guide the ‘dos’ and the ‘donts’ tied to gold. The approval by Cabinet to amend the existing Mining law paves way for the completion of measures on this important topic so that the issues are further clarified through regulations.
The debate on gold is welcomed because it justifies why Government is moving the direction of amending the Mining laws to allow the policy on the declaration of gold as a strategic Mineral to be realised.
2. Status Of Gold Exploration And Mining Licences In Zambia.
There are a lot of gold occurrences in Zambia involving almost all Provinces. The gold occurrences and resources are more pronounced in Eastern Province, North-Western, Central and Lusaka Provinces. Zambia is not fully mapped, meaning there are still areas of Zambia where we do not know what minerals are present at those locations. Gold exploration is even more difficult because in some areas the exploration may not yield promising results of sufficient gold mineralization to justify commercial exploitation. What however sometimes happens is that people later discover substantial quantities of gold e.g. In Mwinilunga, Kasenseli area.
Zambia currently has 3666 Licences as at the end of the first quarter of 2020 broken down as follows:
Type of Licence And Number of Licences.
Artisanal Mining Rights : 418 Small Scale Exploration Licence (SEL): 1306 Large Scale Exploration Licence (LEL): 1252 Small Scale Mining Licence (SML): 541 Large Scale Mining Licence (LML): 109 Mining Processing Licences (MPL): 40
Total – 3666
3. Ministry’s Position On The Partnership Of ZCCM-IH PLC With Karma Limited.
ZCCM-IH Plc has partnered with Karma Limited, a company owned by Sudanese Nationals. Karma Limited set up a gold processing plant in Rufunsa at a cost of about USD$3.5Million. Later the company partnered with ZCCM-IH Plc. That partnership has been actualised through a special purpose vehicle called the Consolidated Gold Company Zambia Limited (CGCZ). CGCZ has been granted a Mining Processing Licence in Rufunsa District where the company has approached two (2) Licence holders namely Chembe Gold Mine Limited and Sabi Gold Mine Limited. The partnership is to use the mineral ore material from these mining companies to process gold. That partnership entails that 65% of the gold will be for CGCZ and 35% for the Licence holders. Currently CGCZ has applied for another Mineral Processing Licence for Mumbwa where the company has approached a licence holder called Array Limited to utilize their mineral ore material. In other words, both CGCZ or Karma Limited are not undertaking any mining of the gold ore material but partnering with existing licence holders. All the gold recovered through this partnership shall all be sold to Bank of Zambia, as per government policy. Even though the Law on the declaration of Gold as a Strategic Mineral has not yet been concluded, the guarantee of securing the gold from this partnership comes from the contractual obligations of the parties and the directive to ZCCM-IH Plc by Government.
The partnership in Mumbwa involves Array Limited supplying gold ore for processing to CGCZ in Mumbwa and Karma will invest USD$2.5 Million for the establishment of the processing Plant. This is a commercial transaction in which a private licence holder (Array Limited) elected to partner with CGCZ for the mineral ore material to be processed by CGCZ. The concept of partnering in business, is done for different reasons including the fact that one would like to mitigate the risks of not having the technology to process.
As can be seen from the explanation above, this ZCCM- IH Partnership with Karma is for the purpose of establishing Gold Processing facilities in two sites namely Rufunsa and Mumbwa. The processing facilities have partnered with 3 existing licence holders out of a total of 3666 Licences in Zambia. The Government encourages several companies to invest in the mining sector and some have specialised only in processing materials such as Karma Limited, the subject of the current debate. There are 39 other companies that have mineral processing licences over Tailings Dumps and other mine tenements. The Ministry has no objections to partnerships that ensure we increase the gold production because ultimately ALL THE GOLD FROM THE PARTNERSHIPS MUST END UP WITH BANK OF ZAMBIA.
Government and ZCCM-IH Plc have been learning from other countries that have high gold production in Africa. For example Ghana is the largest producer of gold in Africa, followed by South Africa and Sudan is third. In 2018 for example, Ghana produced about 150,000 Kilogrammes of gold, South Africa produced 117,000 Kilogrammes while Sudan Produced 93,000 Kilogrammes. In the same year Zambia, produced about 4000 Kilogrammes of Gold. Zambia has a long history of being a copper producing country and can teach a lot of countries lessons on the skill of producing copper. Zambia also needs to learn valuable lessons from other African countries that have perfected gold production and recorded higher gold production figures, therefore lessons can be learnt from Sudan, through the Karma partnership.
4. Way Forward Over Gold In Zambia.
Gold presents many opportunities for Zambians. It is our firm belief that the discovery of the many gold occurrences and resources in Zambia is a game changer for the country. Government through Cabinet has given directives over matters involving gold and as soon as the law declaring gold as a strategic mineral is finalized, several benefits will alight. This gold will benefit the country greatly and offers the following opportunities for Zambia:
a. The Majority of the Zambians who own the licences (Almost 92%) can rise to the challenge and begin to mine or process whichever the case might be. This includes the option of approaching ZCCM-IH Plc to partner; b. More Jobs and social economic development is expected in mining towns where the gold will be commercially exploited; c. Zambian citizens granted Artisanal licences can continue to partner with ZCCM-IH Plc who will buy the gold nuggets recovered through their gold panning activities and the Ministry will continue to formalize the sector; d. The trading of gold presents more opportunities for various Citizens to further benefit that will be further clarified as soon as the law declaring gold as a strategic Mineral is finalized. In other words, we have learned from Ghana and Tanzania, where the trading of gold has created many jobs for the private sector such as gold dealers, gold brokers and separate users or miners that will all be registered by the Government as a regulator of the gold sector.
The partnerships of ZCCM-IH Plc are steps meant to realize the goal of recovering as much gold as possible. The 3 licence holders in Rufunsa and Mumbwa respectively, who have chosen to partner with CGCZ to supply mineral ore, out of a total number of 3666 licence holders in Zambia, cannot reasonably be condemned as frustrating Zambia’s ability to benefit from Gold. On the contrary such partnerships compliment efforts to account for all the gold in Zambia. The steps are not in any way an attempt to disadvantage Zambian Citizens but rather a positive move to learn from those who have experience in gold mining so that ultimately Gold is sold to the Bank of Zambia for use as strategic reserves for the Country. Zambia shall remain a country committed to the promotion of both local and foreign investment in the mining sector.
Barnaby Bwalya Mulenga Permanent Secretary Ministry of Mines and Mines Development.
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