These are some news items that are worth to mention:

• The Post Newspapers Zambia on 02 June reports that that Chinese investments in Zambia have reached about US $2 billion. These all went into mining sector and in Multi – facility Economic Zones (MFEZ). Part of the $2 billion – about $300 million – has gone into the development of the Mulianshi Mine
• The Steel Guru reported that on May 12 the China Development Bank Corporation announced that it will provide $5 billion USD of loans to companies involved in Zambia’s mining sector as part of the agreements signed between the two countries since 2007.
• In May Lusaka Times reported that  China Non-Ferrous Metal Company’s Luanshya Copper Mines is going to recruit 1,000 employees for the beginning of production at the Muliashi open pit mine, taking the total number of workers to more than 3,000. CLM also plans to make an additional investment of more than US$150 million to rehabilitate infrastructure at Luanshya Copper Mine this year. Luanshya is planned initially to produce annually 11,000 tons of ore. The second open pit mine – Muliashi –  is expected to have production capacity of 500,000 tons of copper ore per year.

Within the limits of my Blog, I want to trace China’s activities in Zambian mining industry. These activities are very prominent when you travel from Johannesburg to Lusaka – about half of each flight is filled with Chinese, many of them barely speaking English.

The biggest company that operates in Zambia is China Nonferrous Metal Mining (Group) Co., Ltd. (CNMC) that is under the management of the State-owned Assets Supervision and Administration Commission of the State Council. This is a pioneer among Chinese enterprises to implement the “going abroad” strategy and to carry out international investment and cooperation in nonferrous metal mineral resources. Among other projects, we have to mention the following Zambian ones.

Operational:

• Chambishi Copper Mine,
• Chambishi 150,000-ton copper smelter
• Chambishi Leach Plant
• Chambishi Sulfuric Acid Plant
• Luanshya Copper Mines (started copper production on March 26, 2010 with investment of $ 300M USD)

The projects under construction and development include:

• Zambia-China Economic & Trade Cooperation Zone,
• Western ore body of Chambishi Copper Mine

Here is how the TIME magazine illustrates China’s involvement in Zambian mining:

Chambishi Copper Mine was obtained by CNMC through an international bid in 1998, at which time CNMC also obtained the use right to 41 sq. kms of land on the surface of the mine for a term of 99 years. The mine, with resources including 5 million tons of copper and 120,000 tons of cobalt, and involving a total investment of $ 160M USD, is the first and, to date, the largest nonferrous metal mine overseas approved by Chinese government for development and construction. Construction began in July 2000 and the mine opened for production on schedule in July 2003.

Chambishi Copper Smelter whose designed annual capacity is 150,000 tons of blister copper bears total investment exceeding $310 M USD. The smelter started construction in November 2006 and commenced production by the end of 2008. This project will further improve industrial chain of Chambishi Copper Mine, create nearly 1000 jobs and increase the local export volume by $450M USD. In general, CNMC’s investment in Zambia has exceeded US$ 400 million. This is how the smelter looks.

Sino-Metal Leach Zambia Limited and Sino-Acid Products Zambia Limited — In order to utilize the resources and infrastructure of Chambishi Copper Mine, Sino-Metal and Sino- Acid with total investment of $25M USD was built as an extension of nonferrous metal industrial chain. Sino-Metal and Sino-Acid commenced production on Sept. 8th, 2006, with 300 personnel.

In April it was reported that the Zambian Government has signed a $600M USD agreement with China Non-Ferrous Metals Limited (CNMC) for the extraction of copper from the Mufulira Tailings dams to breathe economic life into the liability that was left over during the privatization of the Zambia Consolidated Copper Mines-Investment Holdings (ZCCM-IH) assets. This agreement covers tailings dams 8 and 10 reprocessed. Sino-Metal Leach Zambia Limited will run the Mufulira Tailings project but this will be dependent on the results of the feasibility studies to be conducted at a cost of $5 million.

Another Chinese company that in January 2010 acquired a substantial part of Albidon Ltd. is the largest nickel producer in Asia – Jinchuan Group.

Albidon is an Australian exploration company with its activities is focused on the Munali Nickel project in Zambia, that has the Enterprise deposit and a number of other nickel prospects in the Munali Intrusion, the most advanced of which is the Voyager prospect along strike to the north of Enterprise. Albidon’s license holdings in southern and eastern Zambia also have potential for substantial uranium deposits. Albidon’s investor presentation from 2008 is located here. It has good pictures of Munali project like this one:

In April 2010 Jinchuan arranged a $20M USD working capital loan facility for Albidon – which resulted in resuming of Munali mine operations and the increase of operational output.

More to follow…

UPDATE: The Steel Guru reports today (July 07) that Non Ferrous Metals Mining Corporation plans to spend USD 500 million to invest in its Chambishi South mine in Zambia and increase copper ore output to 10,000 per day.

“Government should immediately review the entire regime governing the mining sector and to avert the boiling social crisis and despondency that has engulfed the Copperbelt. This will also allow realistic financial benefits to accrue to the country and its citizens. The country should be allowed to collect a credible share of revenue from this wealth. Government has a duty to protect the rights of workers, to provide social service to local communities, and to be an effective regulator in order to protect the environment.”

Back to our narration…

Glencore International AG is a privately held commodity trader, headquartered in Baar, Switzerland.

Mopani Copper Mine is an integrated copper and cobalt producer located in the Copperbelt of Zambia.

This JV shareholders are:

• Glencore International AG – 73%
• First Quantum Minerals Ltd – 16.9%
• ZCCM Investments Holdings Plc – 10%

This June it was reported that Mopani Copper Mines has invested more than USD 1 billion in its operations. Investments in operations in Kitwe and Mufulira mines in the past 10 years has exceeded investment by privatized mines in Zambia.

Mopani’s operations consist of four underground mines, a concentrator and a cobalt plant in the town of Kitwe and an underground mine, concentrator, smelter and refinery in the town of Mufulira. The capacity of the Mufulira Copper Smelter is being expanded in a phased approach to 870,000 tons of concentrate by the end of 2010. The current capacity with the new Isa smelt furnace is 650,000 tons of concentrate.
Also, the company has four SXEW plants (Solvent Extraction and Electrowinning), two at Mufulira and two at Nkana. The feed is sourced from both in-situ leaching, vat leaching and heap leaching. Glencore’s initial interest was acquired through a subsidiary in 2000

Production capacity

• 255,000MT Copper metal
• 2,200MT Cobalt

Number of employees 7,800

A very interesting essay on Mufulira Mine can be viewed here. It has this map

Also for social network fans – here is a link to Mufulira Facebook page

Zambezi Resources Limited (Zambezi) is exploring for and developing copper and gold projects in Southern Zambia. Zambezi has identified seven major project areas, which it is actively exploring. The projects have been identified as Iron Oxide Copper Gold (IOCG) type deposits and also shear-hosted gold deposits. These projects are contained within eight prospecting licenses covering an area of over 16,000km². Zambezi currently retains 100% ownership of its projects, although Zambia’s abundant mineral endowment has lead Zambezi to seek joint venture partners to assist with funding exploration on some of its projects.

Zambezi listed on the London Stock Exchange’s AIM in July 2004, raising £2.5 million.  Since then Zambezi has raised an additional £14 million on AIM through subsequent placements, including a strategic placement to Glencore.  In July 2007, Zambezi successfully listed on the ASX through an IPO, raising an additional A$15 million.

An outdated (2008) Corporate brochure  maybe downloaded here

Zambezi’s relatively mature exploration portfolio and the removal of the retention license option in Zambia in early 2008 severely constrained Zambezi’s strategic options. ZRL voluntarily suspended trading on the ASX on 30th October 2008 and on AIM on 3rd November 2008 in order to secure the finances of the Company. The Company’s story and current status can be viewed at this delisted Web-site.

More coming soon…

Equinox Minerals Limited is an international mining company that is dual listed on the Toronto Stock Exchange and the Australian Securities Exchange (Symbol: ‘EQN’). Since 1999 it is operating a 100% owned large scale Lumwana copper mine. Situated 220 km west of the Zambian Copperbelt, Lumwana is now a major open-cut copper mine — at initial design capacity, Lumwana will process in excess of 20 million tons of ore per year, mined at an average life of mine strip ratio of 4.2:1.  Lumwana ore, which is predominantly sulphide, is treated through a large conventional plant, producing a copper concentrate for sale to local and international offtakers. In 2008, Equinox completed a uranium feasibility study (UFS) investigating the onsite treatment of discrete, high grade uranium mineralization contained within the Lumwana mine copper pitshells. The UFS confirmed the potential viability of onsite uranium treatment, producing about 2 million pounds of uranium per year over a six to seven year period.

The Latest corporate presentation (of June 21, 2010 can be downloaded  at http://www.equinoxminerals.com/docs/Equinox_21Jun10.pdf ) describes all corporate activities in the country, and has this brief overview:

The Company is reporting that Lumwana production for the first two months of Q2-2010 totaled 29,733 tons (66 M lbs) of copper in concentrate – a 46% increase on the average monthly production results of Q1-2010 and a 83% increase on the average monthly production results for the corresponding period Q2-2009. Equinox has maintained its full-year production guidance of 135,000 tons of copper in concentrate for this year, at a cash cost of $1,35/lb.

The Company has begun studies into a phased capacity expansion at Lumwana mine. This will examine an initial expansion to 24-million tons, which Equinox believes could be achieved with limited additional spending and within an 18-month timeframe, followed by a further increase to an eventual 35-million tons a year.

First Quantum Minerals Ltd., a growing mining and metals company, is engaged in mineral exploration, development, mining and refining. The Company produces LME grade “A” copper cathode, copper in concentrate, gold and sulphuric acid. First Quantum’s common shares are listed for trading on the Toronto Stock Exchange in Canada (symbol “FM”), the London Stock Exchange (symbol “FQM”) in the United Kingdom. First Quantum is a member of the S&P/TSX 60 index.

Investor presentation contains major data on all projects, including the following:

Kalumbila Exploration Projects (100%), Zambia

• Acquired for cash and shares valued at approx. US$260M in January 2010
• Main asset is a controlling interest in mineral prospecting licenses covering 2,850 km2on the periphery of the Kabombo Dome
• Includes the Kalumbila copper deposit —undergoing infill drill program to establish indicated resource on the open-pittable mineralization identified by drill results to date
• Also includes the Kawako nickel and the Kawanga uranium prospects

Kansanshi Copper-Gold Mine, Zambia

• 80% owned, in Zambia
• Located in the North Western Province
• Achieved commercial production in 2005
• 13-year estimated mine life; 20-year including inferred resources
• Extensive drill program to update reserves and resources estimate completed

Bwana Mkubwa Copper SX\EW Plant, Zambia

• 100% owned, in Zambia
• Produces copper cathode and sulphuric acid
• Currently processing the Lonshi oxide ore at an output level of approximately 800 tons per month

The company is fast-tracking development of the Kalumbila copper project, which it acquired last year through the takeover of Kiwara Plc. The project could be producing as early as 2013 and could churn out as much as 150,000 tons of copper a year. A very cognitive story on Kansnashi mine was recently produced by the Vancouver Sun (A bittersweet story in Zambia).

More to follow…..
UPDATE FROM PLATTS:

Zambia’s copper output in May 2010 rose 5% to 68,216 mt from 64,908 mt the previous month, the Bank of Zambia said Monday in its monthly statistics statement on mineral production and exports.

First it is worthwhile to mention some major news updates on the Zambia’s mining business:

• The Steel Guru reported on June 1^st that mining revenue in Zambia are expected to grow to 30% from the current 4% by the year 2013 when mining companies start making profits.
• The Post Zambia informed that the country’s mineral sector has the potential to produce a diversified range of minerals which can raise US $20 billion if properly managed and developed; and the copper/cobalt sector could increase its production from the current 600,000 to 1.5 million metric tons within the next five years.
• An interesting discussion about windfall tax and the state of mining was reported by the Steel Guru: “… production infrastructure had been dilapidated resulting in low production citing the year 2000 when copper production was only 257,000 tonnes. Infrastructure has been rehabilitated and new facilities opened up resulting in copper production of over 600,000 tones in 2009, among other benefits. Copper sales stood at 656,000 tones in 2009 while in 2008 sales were at 515,000 tonnes and 459,000 tonnes in 2007.”
• One of the major setbacks was the last week’s electric power failure that significantly affected mining operations.

About 60 companies are listed as operational in Zambia by MBENDI . And it is impossible to describe activities of each one; many of these companies suffered setbacks from the financial crisis.

Of course  the biggest in the country is ZCCM Investments Holdings Plc (ZCCM-IH) —  investment holdings company (listed on the Lusaka ,London, and Euronext Stock Exchanges). This has the majority of its investments held in the copper mining sector of Zambia. The Company’s shareholders are the Government of the Republic of Zambia (GRZ) with 87.6% of equity and private equity holders (12.4%) that are spread throughout the world.

The Post Zambia reported this month that ZCCM – Investment Holdings (ZCCM-IH) has never published audited financial statements for the last four years. However, all consolidated data on investments is represented at  this page.

ZCCM owns equity of the following Zambian copper mining companies:

• Chambishi Metals (10%)
• Chibuluma Mines plc Zambia(15%) in Kalulushi
• Copperbelt Energy Corporation (20%) in Kitwe
• Kansanshi Mining plc (20%)
• Konkola Copper Mines (20.6%) in Lusaka
• Luanshya Copper Mines plc (15%)
• Mopani Copper Mines plc (10%)
• Equinox Minerals (5,55%)

More information may be found at the Google Finance site.

Interesting to note that there is a heated discussion in the country on the immediate stoppage of government subsidy to Zambia Consolidated Copper Mines Investment Holdings as the major shareholder who had to support the operations when the company was making losses.

One of the biggest foreign miner in Zambia is a London Stock Exchange- listed  Vedanta Resources PLC (VED.LN). the company’s assets consist of four mines, one at Konkola, two at Nchanga and one at Nampundwe, a tailings leach plant at Nchanga and a smelter at Nkana. Konkola Copper Mines – KCM (Chililabombwe) – Vedanta owns 79.4% of equity —  operates the wettest mines in Zambia and pumps out water every day to allow normal mining operations. A new smelter at Nchanga, with a total capital outlay of approximately $470 million, is expected to have a capacity to produce annually 300,000 tpa of copper anode and 1,850 tonnes per day of sulphuric acid. Feed concentrates are expected to be primarily from KCM’s own mines.

Here is a brief summary on the Zambian operations from the latest corporate presentation:

World class resource

• 471mt of Reserves and Resources
• 12mt of contained Cu, 25+ years average mine life
• Konkola mine grade of 3.6%; average KCM grade of 2.5%

Well invested production facilities

• Nchanga smelter achieves rated capability in capacity and recovery
• KDMP mid-shaft loading – 31 March 2010; Project on track
• $1.5 bn capital investment

Key deliverables

• Growth from 133kt production in FY2009 to exit capacity of 400+ kt in FY2012
• Further cost reduction and stabilization, targeting < $1.00 / lb in cash cost
• Resource growth through exploration

Largest mining investment in Zambia

• Strong working relationship with Zambian government
• Healthy labour relations
• Committed to training and developing Zambia’s workforce
• Local communities: health, education and welfare programs

This concludes the first part of update on mining operations in Zambia. More to follow…..

Sourced from International Trade

By Bob Northgate

The taxes and other contributions to government that mining companies pay are an important element in the creation of prosperity and stability of the countries in which they operate. However, the full extent of this contribution is not always recognised. PricewaterhouseCoopers’ second Total Tax Contribution (TTC) study of the global mining industry aims to bring greater transparency to the full economic contribution that these companies make by providing data on all taxes and other payments made to government.

The results show that mining companies make a large economic contribution to public finances in relation to the size of their operations. On average, the companies participating in the study paid an amount equivalent to 15.3% of their turnover to government, comprising 10.8% in amounts borne and 4.5% in amounts collected. These companies pay many other taxes and contributions in addition to corporate income tax which, on average, represents only 40% of all the taxes and contributions they bear. For every $1 of corporate income tax paid, these companies pay another $1.50 in other taxes and contributions borne, plus $0.52 in taxes collected.
Susan Symons, global Total Tax Contribution leader, PricewaterhouseCoopers comments:
“There is increasing pressure on both government and business to increase transparency in the extractive industries, with a call for companies to ‘publish what they pay’, and for governments to ‘publish what they receive’, and how they use these revenues.
The mining industry, perhaps more than most other industries, remits large amounts of non-income taxes to various levels of government in the form of employment taxes, royalties, VAT/sales/use taxes, infrastructure funding and other levies. The income tax portion of a company’s financial results is highlighted in its financial statements, but other taxes and payments are not segregated in its results, thus diminishing what it appears to pay to government.
The TTC Framework, used in this study, goes beyond income taxes to collect data on all taxes and other payments to government to give a wider view of the entire tax burden of an enterprise. It provides a good basis for mining companies to report all the various taxes and contributions they make, in a non-tax-technical format which is relatively easy for all stakeholders to understand.”
The study covers a turbulent period, which saw the advent of the global financial crisis and a fall in commodity prices. The impact of the downturn on the mining sector is reflected in the study results, with an increase in the Total Tax Rate (TTR) – the tax cost as measured in relation to profitability. The average TTR for mining companies increased from 32.2%, when the first study was conducted a year earlier, to 39.3%.This is because, while taxes on profits may fall with lower profitability, other taxes and contributions (which are not linked to profits) do not fall and thus become relatively more expensive.
The companies participating in the study reported total figures for turnover of US$62.9bn, wages and salaries paid to employees of US$6.0bn, and a total contribution to government of US$10.1bn. The average total contribution to government by a company in a country reported in the study was US$190 million, comprising an amount of US$146 million borne and US$44 million collected.
Jason Burkitt, UK mining leader, PricewaterhouseCoopers said:
“Mining companies extract natural resources and as a result are naturally the subject of intense scrutiny from government, civil society organisations and other stakeholders. They are large employers and on average, for companies in the study, employment taxes were $15,349 per employee. This is an indication of the direct benefit to public finances of each job created or maintained by these companies. All companies are coming under increased public scrutiny regarding the taxes they pay, and mining companies are at the forefront in this debate. Mining companies pay taxes throughout the life cycle of a mining project, and pay many other taxes in addition to corporate income tax, including employment taxes, property taxes and indirect taxes. In addition, mining companies often make significant further contributions to government finances through sector-specific taxes, royalties and levies, and contributions to local infrastructure such as roads, schools and housing.
“Our work on tax transparency shows that some mining companies are including TTC data in the communication of their tax affairs and leading the way in corporate reporting for tax.”

You may download the full text of the sturdy HERE

“While cash flow from operations decreased, the Top 40 still spent $74 billion on investing activities in 2009. The vast majority of the spend was on plant and equipment as funds were channelled to existing projects, which had greater potential for a short-term impact on reserve replacement and production.However, in contrast, the year ended with the market capitalisation of the Top 40 returning to the heights of 2007 and a cautious optimism returning to market releases,” – mentions the report. It goes on further: “Exploration spend by the Top 40 declined significantly, not surprising given its discretionary nature. As reserve replacement becomes more challenging, the lack of spend on exploration poses the question—when and where will the next world-class mines be found?”

Of course, it is impossible to miss the hottest subject these days: “The Australian government recently announced a “Resources Super Profits Tax” and royalty increases have been flagged in several other jurisdictions. Mining and politics are intertwined, but the industry has recently moved even further up the political agenda, with focus on matters such as taxation, carbon and sovereign influence.”

While there is an abundance of valuable information in the report and the final chart is this:

I would like to note one very important feature: it has an analysis of major metals and commodities that is really useful for mining strategists – when you are planning to develop your mining business.

There was a lot of talk about potash in the last year – so here we are – for the first time potash miners are included in the list. That means that potash is one of the new trends in business development?  “Potash companies have drawn notice during 2009 as a commodity of interest for the diversified miners, particularly as the significance of their mineral development and extraction business grows”, – notes the report. The comparison of commodity prices is also worth thinking about:

And its comparison with revenue:

So, this all and much more make the document really worth reading….

“Mine: Back to the Boom” report  can be downloaded HERE

This was said way back in 2008, when Deloitte produced a study “Tracking the trends 2009. The top 10 global mining issues”. This report identified the ten most pressing global challenges facing the mining industry at that time:

1. The commodity price rollercoaster Is this a short-term phase or the new norm?

2. The double squeeze. Caught between higher costs and lower prices

3. Capital punishment. Tight credit markets put expansion at risk

4. Running on empty. Talent and equipment shortages remain chronic

5. Risky business. Permitting, politics and tax policy volatility

6. Location, location, location. Quality assets are getting harder to find

7. The urge to merge. Consolidation remains an industry imperative

8. Towards sustainable development. Environmental concerns continue unabated

9. The cost and complexity of compliance. Preparing for a tighter regulatory environment

10. In the dark. Electricity shortages affect operations

Well,  18 months later, it seems that these concerns remain basically the same. Beginning of 2009 was marked with fast pace of Chinese companies on the M&A market. This year, it looks like the new pandemic is spreading – affecting No. 4 and 9 of the above. The latest initiative of the Australian Government on taxes is being picked up in the world. “Brazil and China may follow Australia’s lead. India and the Democratic Republic Congo have since promised new mining taxes. There could be major consequences for the industry. Multiple windfall levies could push up metal prices by 10% to 15% longer term, according to UBS.” – this is Wall Street Journal. So, miners have a lot to think about….

Another view on miners’ concerns was highlighted this month by the new study , “The Mincom Annual Study: Mining Executive Insights”. This done by Mincom, a leading provider of software and services to mining companies worldwide; being the first in a series of research studies designed to gauge perceptions of key stakeholders in the mining industry.

The list looks as follows (percent of responders):

• Ensuring workplace safety (71 percent)
• Improving performance and operational effectiveness (67 percent)
• Managing capital projects (46 percent)
• Recruiting and retaining a skilled workforce (38 percent)
• Addressing environmental concerns (37 percent)

It interesting to note that the new issue emerged: Ensuring workplace safety.  “Workplace safety is a complex topic that encompasses cultural, equipment, work management and safety feedback mechanisms. It is also an area impacted by many of the other top challenges that mining executives face. When accidents happen, they make headline news, putting companies and their business practices under the spotlight.” It is true and we have seen a lot of unfortunate examples in recent months.

Over 73% of respondents stated the top action their company is taking is to build an accurate operational model that links predictive production costs to operations and finance – no other action comes close in terms of urgency:

Another worth mentioning fact is determination of biggest obstacles to organic company growth:

• For all mining companies, the top obstacle to organic growth is “complying with government regulations.”
• For coal mining companies – “decline in market demand” was the biggest hindrance.
• For gold and copper mining companies – “delays in getting new mines operational”.

I am sure that this year will bring more and more anxiety to the mining business, but nevertheless, I still think that we should be optimistic!!!

Download the “The Mincom Annual Study: Mining Executive Insights” HERE

Indeed, when makring the right decision about investment strategy it is important to take into consideration as much information as possible.  Since 1999, Behre Dolbear started a political risk assessment of countries important  to the mining industry. This is alleviated by the fact that mining industry is vital to the creation of wealth and prosperity in
any country.

The  Behre Dolbear’s assessment includes the high risk and low risk parts of the world for receptivity to mineral investment, as well as information about conditions in the countries such as economic and political systems, social issues, permitting, corruption, etc. It interesting to note that the company has a very peculiar stance regarding their report, as it is mentioned in the preface:

“We recognize that many might consider what we have said to be provocative, which is our intent.”

However, whatever provocative their findings are, they are nevertheless valuable  both in staregy panning and execution of everyday business. This is not technical assessment, as one might expect -  “Geology and mineral potential were not considered, as the fact that exploration, development, and mining activity are occurring confirms the existence of such potential. We recognize that if a major mineral deposit exists in a high-risk country, a mining company might well decide that the financial incentive exceeds the political risk; e.g., Barrick’s Reko Diq project in Pakistan and Banro Corporation in the eastern Democratic Republic of the Congo (D.R.C.).”

The countries are ranked by the following criteria:

• the country’s economic system;
• he country’s political system;
• the degree of social issues affecting mining in the country;
• delays in receiving permits due to bureaucratic and other delays;
• the degree of corruption prevalent in the country;
• the stability of the country’s currency; and,
• the country’s tax regime.

So, this make another essential document that any mining professional has to read and study

It can be downloaded HERE

Dr. Surendra Kumar Sarangi M.Sc., Geology, Ph.D., from Geomin Consultants Pvt Ltd is spearheading Earthstone’s efforts in geologic valuation of opportunities in Zambia. To this end a pilot process was established that is operationally testing the sales and delivery procedures for manganese dioxide.  Our pilot site produces manganese dioxide:

It is initially sorted and then transported in the bags to the storage facility at the town of Mansa:

After sorting and testing at the laboratory at the storage facility the ore is being transported by railway to the port of Dar-Es-Salam for the sales to the customers. Although at this time the described operation has a pilot character (nonetheless, with actual sales), we feel that within a few weeks we will be able to start full-scale sales process. Of course this process is a supplement to regular production, and much is being done in this sense. We are in discussions with a number of local producers, and actually a full-sized roll-up process is under development. We are also in agreement with several mining entities that are willingly delivering their ore for our processing and sales. Current plans call for production level of 20,000 tons of manganese dioxide by the end of 2010.

It is only natural that operations in a new country require a solid logistic support. In just a little bit more than two months the Holdings has set up its Lusaka Headquarters in this beautiful part of the city:

Our facilities include a fully equipped office and comfortable guest houses.

The area around our mining operations in Luapula Province (about 800 kms off Lusaka) – the city of Mansa – shall be the hub of local activities. At this time the local headquarters office is under refurbishment – that, besides logistics facility, shall also include comfortable guesthouses and communications hub.

This is only the beginning of our extensive exploration and mining efforts in the country and we will report more in our subsequent posts.

Mon Apr 19, 2010 By James Regan

SYDNEY (Reuters) – Iron ore miners may end up regretting a hard-won fight to establish spot-market pricing as the industry benchmark if a barrage of new mine production turns today’s supply deficit into tomorrow’s glut.

Conventional wisdom has miners on a fast track to riches for years to come as China, the world’s top producer and buyer of iron ore and maker of steel, continues to pursue rapid economic growth and a global economic recovery takes hold.

But even with spot ore prices rocketing above $175 a tonne, the highest on record, more than a few industry players are weighing whether dozens of new and expanding iron ore mine projects will outstrip steel demand and send prices into reverse as soon as 2012.

“We’ll take the higher prices when they come, but we must also be ready to accept a drop in a down market,” said Mike Young, managing director of Australia-based BC Iron (BCI.AX), who plans to hedge output for the first time to protect against future price drops.

A turnaround in iron ore prices could hit BHP Billiton (BHP.AX) (BLT.L), Vale (VALE5.SA), Rio Tinto (RIO.AX) (RIO.L) and other miners furiously digging for more supplies.

Current demand for 1.3 billion tonnes of iron ore produced annually suggests a deficit, according to official Australian government forecasts. But that deficit could vanish if iron ore output matches growth forecasts of 50 percent more ore by 2015.

At the same time steel output is widely forecast to grow by only a third, to about 1.7 billion tonnes.

The new iron ore pricing regime started on April 1, with reports BHP was paid $131 a tonne for its ore under April-June contracts based on the average January-March average spot price — more than twice last year’s fixed price.

Rio Tinto last week became the last of the world’s top three producers of iron ore, who control two-thirds of total seaborne iron ore trade worth about $88 billion in 2008, to dump benchmark pricing, despite bitter opposition from steelmills.

The price over the following three months will be determined by the indexed, or averaged, spot price between April and June.

NEW SUPPLIES SPAN THE GLOBE

Australia, the world’s largest exporter of iron ore, expects to ramp up its annual shipments by 40 percent to 552 million tonnes over the next five years.

More than two dozen mines are proposed or under development in Australia, some of which could contribute hundreds of millions more tonnes to worldwide supply.

Gindalbie Metals (GBG.AX), which holds a $65 billion life-of-mine sales contract with China’s Ansteel, has the potential to produce 30 million tonnes of ore annually for three decades from the Mid-West region of Western Australia.

Unlike the rich Pilbara iron belt to the north that has sustained BHP and Rio for decades, the Mid-West is only now starting to yield the first of an estimated 1.5 billion tonnes of ore.

“Gindalbie and the others in the Mid-West haven’t even begun to tap the potential there,” said Gindalbie Managing Director Garett Dixon. “That means a lot more ore going out the door.”

China has also taken higher iron ore prices as a cue to dig at home and hopefully find richer supplies in the face of declining grades to lessen its reliance on imports.

Globally there are projects from West Africa to Brazil such as the Caraja Serra Sul project which alone will yield 10 million tonnes more ore than is needed to meet 50 million-tonne-per-year growth in global steel production forecast by Hatch Corporate Finance Chief Executive Rod Bellows.

A GLUT?

The cumulative effect of the production boom has some analysts predicting a glut.

“Iron ore markets are set to remain tight for the next two to three years, but could be heading into protracted oversupply,” said Citi commodities analyst Alan Heap.

Iron ore prices fell for the first time in more than a decade in 2009, when the global financial crisis left the world with more ore than steelmakers could use. That ended when China began a massive economic stimulus programme that same year.

But Eric Li, vice president of business lobby group CBI China, predicts steel demand growth “will significantly drop and domestic iron ore supply will dramatically rise” in 2010.

China has repeatedly tightened monetary policy this year to cool inflation, stirring concern demand could wane and quickly reverse the direction of ore prices.

“Mess with Chinese demand and every iron ore producer will feel the effect,” said DJ Carmichael & Co analyst James Wilson.

It is not just China. Globally, steel prices are levelling off after sharp hikes in the second half of 2009, said Trent Allen, iron ore analyst at Resource Capital Research.

“In spite of the recovery, there are some short to mid-term downside risks for iron ore,” Allen said.

“These include oversupply in the steel sector as the result of cheap credit, especially in China, and a decrease of stimulus-driven stockpiling and investment in new mines, which could lead to an oversupply of iron ore.”

(Editing by Ed Lane)

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