You can see, and hear a mining operation from far away. Everything about them is monumental: from the vast tipper trucks and shovels of a surface mine, to the looming presence of a shaft head-gear that drops miners and machinery into the bowels of the earth.
But all this activity, noise and commotion is the result of work that was done many years beforehand, quietly and unobtrusively, by small groups of people working out in the bush, with just a few vehicles and a portable drill no different from what you would use to sink a borehole.
These are the explorers and prospectors. More often than not, they are small operators who travel light in hope of big rewards.
Exploration is one of the most high-risk activities in the mining business. The global statistic for finding a deposit that can be mined economically is around 0.3% of targets explored. The chance of success improves a bit in the vicinity of existing mines, but is still well under 5%. And not all discoveries are developed into mines; historically only 50-70% are developed. Around the world, billions of dollars are spent every year on exploration mostly for no reward.
But the future depends upon there being people who are willing to take these risks, because for every kilogram of ore taken out of the ground, another kilogram (or two) must be found somewhere else to sustain the industry, or grow it in the best-case scenario.
As Zambia’s economy is still dependent on copper, finding these deposits is not only essential to building the mining pipeline, it is essential to the health of the economy. And, every year the industry survives and thrives is another year where the income, expertise and opportunities from mining can be used as a stepping stone to diversify the Zambian economy.
This is why it is of such concern that explorers – and exploration budgets – have been packing up and leaving Zambia.
The state of exploration in Zambia
Ten years ago, the annual expenditure on mineral exploration in Zambia was in the region of US$ 100 million. Today it is somewhere between US$10-20 million.
Global exploration budgets tumbled along with copper prices from 2012, but in other parts of the world there has been a significant rebound since 2016. By contrast, Zambian exploration has remained in the doldrums.
According to Alex Matthews, Secretary of the Association of Zambian Mineral Exploration Companies (AZMEC), “There are probably only 5 exploration drill rigs actually drilling on exploration projects at any one time in Zambia right now. In the DRC, there are likely to be 10 times that number at work”.
The mining pipe line
At current production levels, Zambia needs to add about one million tonnes of copper to the national inventory every year just to replace production from operating mines. The last addition to the inventory was back in 2012 when Kalumbila opened, adding some 4.5 million tonnes to the stock.
There are probably only 5 exploration drill rigs actually drilling on exploration projects at any one time in Zambia right now. In the DRC, there are likely to be 10 times that number at work
Zambia’s copper resource inventory currently stands at around 20 million tonnes – in other words, about another 20 years of mining. According to AZMEC, there are currently no major copper prospects in the pipeline. Given that the time between finding a payable deposit and a mine actually being developed is typically 10-15 years, and can be longer, Zambia needs to find some major deposits soon. But without a substantial boost to exploration activity, the chances of this happening within the time available are small.
Where did all the money go?
The 2008 global financial crash significantly reduced global exploration expenditure, which was then compounded by the slump in commodity prices between 2012 and 2016. To some extent, Zambia weathered the storm between 2008 and 2012, as several explorers managed to justify their continued, albeit reduced, expenditure in what was perceived then to be a favourable jurisdiction.
Unfortunately for Zambia, this period of global turmoil coincided with the onset of local policy and legislative instability which has severely damaged Zambia’s reputation as a safe destination for mining investment. In the past 10 years we have seen 3 new Mines Acts, which have been amended 14 times, with 8 changes to the tax regime – not counting the proposals in the 2019 Budget.
Explorers are mobile, unlike miners. According to Mr. Matthews, “the lack of long-term policy stability has corroded confidence in the country”, and is keeping exploration dollars away, while competitor countries have been recording increased exploration expenditure since the copper price began improving in 2016.
It’s as easy as 1, 2, 3…?
Perhaps because of Zambia’s long history of mining, and the commonly-held belief that the country is bursting with minerals, there is a tendency to massively underestimate the difficulty of the task of minerals prospecting.
Furthermore, Zambia’s low-hanging fruit have already been picked.
With one or two exceptions, all of Zambia’s past and existing mines were found because the mineralisation was visible on the surface, and therefore easy to locate and test. Hundreds of surface mineral occurrences were recorded during the early prospecting days of the 1920-30’s and 1950-60’s. These lay unexplored during the period of state ownership of the mines between 1969 and 1995.
Since liberalization of the mining law in 1995, allowing private ownership of mining rights, the most enticing of these historical occurrences have been examined, and a few like Lumwana, Sentinel, Muliashi and Munali have been developed into mines. Near-mine exploration has also added Kansanshi, Chambishi Southeast, Nkana Synclinorium and Lubambe mines.
However, since 1995, greenfield exploration – at sites where minerals are not already known to exist – has yielded very little. The small copper deposits Kashime (Mkushi) and Kitumba (Mumbwa) are the only new copper discoveries since Independence, and neither are presently in production.
There may still be some chance of finding a major deposit at or near the surface, although the greatest potential lies deeper below the surface, up to 500 metres or more underground.
This new frontier is a hard place to work; targeting at these depths is technically difficult, very expensive, and with small chances of success even after years of work. But it can be done – and it needs to be done soon.
According to Mr. Matthews, Secretary of AZMEC, “higher fiscal risk jurisdictions struggle to attract international exploration funding”. In his view, the 2019 Budget proposals will have an “entirely negative” impact on mining exploration.
Instead, the Zambian government should be actively incentivising exploration with tax policies “that acknowledge that exploration is actually a loss-making research and development activity that generates no income, but whose success is in the national interest”.
Zambia needs a thriving copper mining industry, and would surely want one even if, in the future, it is no longer wholly reliant on it. Think of Canada and Australia. There is still time to act, to create the conditions that are likely to draw in the skills and the budgets to find the next mine. Without them, the mining industry – and Zambia – has an uncertain long-term future.