Mopani copper mine has proposed to Government to put the mines in Kitwe and Mufulira under care and maintenance.
Mines Minister Richard Musukwa announced during a news briefing that he was informed by the Glencore Executive Director that the two mines are be put on care and maintenance for effective today, Tuesday 7th April 2020 for three months.
Mr Musukwa said Mopani is citing the global economic challenges which have led to the price of copper falling to about 4,800 dollars per tonne and the disruption to international mobility due to the Covid-19 out break.
But Mr Musukwa announced that government has refused to grant Mopani mine placement under care and maintenance.
He said the plan has been rejected because the reasons forwarded by Mopani are not adequate and lack merit.
The Mines Minister said plans by Mopani Copper Mine to place its two mines on care and maintenance were unacceptable and unjustified.
Mr. Musukwa said the reasons advanced by Mopani Copper Mine to place the mines on care and maintenance fail far beyond the provisions of the law.
Below is the full statement
Mopani Copper Mine (MCM) contacted the Ministry Last week on Wednesday requesting to have a video conference with the Minister.
Yesterday on Monday 6th April 2020 at 14hrs we held a video conference involving Glencore Head of Copper Africa Mark Davies, Nathan Bullock CEO Mopani Copper Mine (MCM) with Myself and our respective technocrats.
The Glencore Executive Director informed me that the Company was going on ‘Care and Maintenance’ from Tuesday 7th April 2020 for 3 months citing 2 reasons namely the global economic challenges which have led to the price of copper falling to about US$4,800 per Tonne and disruptions to international mobility. Another reason cited was the challenge of COVID 19 in terms of putting projects on hold until key personnel can travel to the mining sites.
Mark Davies informed the meeting that some personnel in Management would be laid off while unionized workers would obtain their salaries for the 3 months from today the 7th of April 2020, after which the situation would be up for review. A further indication was made that an ex-gratia payment of one month’s salary would be made to unionized staff employed by contractors in addition to some severance package. Later in the afternoon, after the meeting an electronic copy of a letter dated 6th April 2020 addressed to the Director of Mines and copied to my office was emailed by MCM.
The letter claims that the company had taken the action pursuant to section 37(1)(d) of the Mines and Minerals Development Act which provides for closure of a mine based on Force Majeure. For avoidance of doubt, 37 (1) of the Mines and Minerals Act cited by MCM states:
“Subject to the other provisions of this section, a holder of a mining licence or mineral processing licence may suspend or curtail production of a mine for any of the following reasons:
(a) the maintenance, installation or de-commissioning of equipment;
(b) an unsafe working environment;
(c) uncontrolled pollution of the area resulting from the mining operations;
(d) Force Majeure; or
(e) a labour dispute that disrupts the mining operations”
The Ministry has studied both the letter from MCM and the oral submissions during the Video conference submission and wish to react as follows:
1. The Government of the Republic of Zambia Rejects this attempt by Mopani to put the Mines in Kitwe and Mufulira on CARE AND MAINTENANCE because it does not conform with the Law. The reason cited of Force Majeure is defined in the Law as:
“FORCE MAJEURE ” means an event which is beyond the reasonable control of a Licence holder and which makes the exploration or mining operations under the licence impossible”
The Ministry is not aware of any event that has happened that is beyond the reasonable control of MCM and which makes mining impossible.
Force Majeure relates to an event that can best be described as “AN ACT OF GOD” which clearly is beyond the control of an employer but in this case no explanation equivalent to “An act of God has been availed”.
2. The letter from MCM and the video conferencing failed to provide clear evidence of what has happened that would trigger MCM citing Force Majeure. Fluctuations to the copper price are a constant in the mining sector and cannot reasonably be classified as “Events” beyond the control of the company. The price of copper per Tonne has been fluctuating for many years. MCM came to Zambia in the year 2000. Between the year 2000 and today, the price of Copper has fluctuated from as low as US$2000 to US$9900 per Tonne. It is therefore surprising that the price of Copper can be cited as one of the reasons necessitating the need to claim ‘Force majeure’ because the current price is about US$4,800 per Tonne. This Price is not as low as some years when it was as low as US$2000 per Tonne. It is therefore shocking that this circumstance of copper being at US$4,800 Per Tonne can reasonably be considered as beyond the control of MCM, which had weathered worse price fluctuations in the past. This is clearly not ‘AN ACT OF GOD” but a normal business trend.
3. MCM claims in their letter that two weeks ago they began a comprehensive review of the business against the backdrop of an extremely challenging environment impacted by the COVID
19. Zambia as a jurisdiction registered its first two cases of COVID 19 on 16th March 2020. The timing of COVID 19 in relation to the analysis by MCM reveals that none of the COVID 19 developments in Zambia could realistically be said to have specifically impacted MCM to trigger Force Majeure. The measures taken by government to mitigate the effects of COVID 19 have hitherto not been a lock down but steps to allow commerce to continue in the country, especially the mining sector. At no point has MCM specifically raised concerns of specific goods or services being withheld that are critical for their operations. This reason therefore came as a complete surprise to the Ministry.
4. The Minister of Finance specifically took measures to mitigate the impact of COVID on the Mining Houses and the measures include:
a. Removal of provisions of SI No. 90 relating to claim of VAT on imported spare parts, Lubricants and Stationery to ease pressure on companies;
b. Suspension of Export Duties on export of concentrates in the mining sector to ease pressure on the sector and
c. Suspension of Export Duty on precious metals.
5. Last week, Mopani specifically requested to have a video conference call in the light of COVID and at no time were the issues of disruptions to international mobility raised, it’s therefore shocking that again MCM can claim these reasons amount to FORCE MAJEURE.
6. Government is aware that MCM has been attempting without success to change various aspects of their business model including the Procurement system which the Ministry challenged as not conforming with section 20 of the Mines and Minerals Development Act on giving preference to Zambians on the supply of goods and services. The government cannot therefore accept an attempt to use the COVID 19 pandemic as a scapegoat to push an agenda to lay off people without lawful reasons and circumvent the law to achieve an end.
7. The proposal by MCM is further rejected because for a mine to be put on care and maintenance, there are processes required to ensure that Mine Safety, Environmental concerns and the welfare of miners are secured. An event which reasonably can be classified as Force majeure such as a collapse of a mine or sudden flooding of the Mine after an earth quake does not present time to plan what the way forward would be. In this situation however MCM has had the time to analyse what they call a business review process that is clear on the goal but weak on the process to be undertaken.
8. Whereas the MCM letter claims that no retrenchments will be made, it categorically says some management employees will be laid off while severance packages will be granted to unionized workers under contractors. This again points to the long outstanding issue of attempting to cut off the current suppliers of goods and services in preference for a model that disadvantages Zambians. We are on record and I wish to reiterate that we shall not allow the exploitation of Zambian contractors because our law is very clear that preference must be given to Zambian providers of goods and services.
9. As Minister responsible for Mines and Minerals Development, I wish to assure first the Workers of MCM that your government will not let you down and allow MCM to circumvent the law to favour their interests. We are a pro-poor government who were elected to ensure that Zambian workers are protected and where there is justification we will allow the laying off of people but not in this situation where we clearly have MCM fishing for reasons to lay people off. This situation does not amount to Force Majeure and we believe it’s possible and allowed by the law to lay off people using the right procedure where a company engages the Unions, the contractual workers and the Government in a constructive manner.
10. I have further rejected an attempt to give government less than 24hrs notice to effectively lay off more than 11,000 workers and put a mine on Care and Maintenance. We shall further engage MCM to be more forthright and engage in genuine dialogue to look into the plight of workers and the life of the Mines in Kitwe and Mufulira respectively. There is no Force Majeure that can reasonably be seen by any reasonable person analyzing the sector. Where an Act of God or Force majeure occurs, it tends to be so clear everyone would agree that a situation has so presented itself but in this instance we do not agree as Government that Force majeure has been triggered that can justify waiving workers rights, Environmental concerns and Mine Safety. My office shall keep you updated of the developments as we continue to discuss with MCM.
I thank you
Hon. Richard Musukwa, MP
Minister of Mines and Minerals Development
7th April 2020