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Harare - Zambia's power utility Zesco's decision to raise power tariffs by 25% has left copper mining companies there in the lurch, with Vendanta Resources placing its underground operations at Nchanga under care and maintenance.
Vedanta Resources also operates the Konkola copper mines in Zambia and the 25% tariff increase by Zambia, which is already facing severe power shortages, will have an adverse impact on its production costs, it said on Friday.
Power generation
Zambia is Africa's second largest copper producer after the Democratic Republic of Congo but production is expected to be flat this year.
"Power tariffs were increased by 25% from 1 January 2016. This will have a US$3m per month adverse impact on the cost of production," said the company.
Another Zambian mining company, First Quantum Minerals said it had resumed full scale operations at its mining and smelting projects after Zambia secured additional power imports from South Africa's Eskom power utility.
Power production from the Kariba dam – which also supplies water for power generation to Zimbabwe – has been massively cut because of unsustainable low water levels.
Mining companies in Zimbabwe are resisting a 49% power tariff increase, with the country also now getting 300MW from Eskom and a further 100MW from Mozambique. However, the government said on Thursday that it would press ahead with the tariff hike, arguing that the power utility “should recover its costs” or the country risked being without electricity.
Vedanta Resources said during the third quarter to the end of December that it had placed its Nchanga underground (NUG) operations under managed care and maintenance. However, “the resulting production losses will be compensated by additional CRO feed for the concentrators” and purchased concentrates for smelting.
“Placing the NUG operations under care and maintenance will reduce operating costs by approximately $1m per month,” it said. This would help to marginally recoup the additional $3m in costs brought about by the 25% power tariff raise.
Reduce power consumption
During the quarter under review, copper production cash costs were significantly lower by 16% compared to the previous quarter, mainly as a result of higher volumes, cost saving initiatives and reduced power consumption.
The company said it had achieved a 12% reduction in power consumption during the quarter, following the placement of the Nchanga underground mine on care and maintencance as well as through refinery optimisation and measures to reduce power consumption at administrative units.
Production for the period was 32 000 tonnes of mined copper, representing an 11% jump on the prior quarter. Mining from the Konkola mine was 48% higher owing to “improved efficiency, higher equipment availability and higher copper grade” at the mine.
