Zambia Opts for Royalties Payments in Agreement with FQM Mining

A majority-government-owned Zambian investment firm and First Quantum Minerals (FQM) have reached an arrangement at the Kansanshi mine.

ZCCM Investments Holdings (ZCCM-IH), 77.7% of whose shares are owned by the Government of Zambia, renegotiated its arrangement with the Canadian mining firm, whereby the government will receive a portion of revenue from the jointly-owned Kansanshi mine instead of dividend rights.

Under the new arrangement, ZCCM-IH will received 3.1% of all revenue from Kansanshi Mines, incentivising better mining and improving the mine’s liquidity. The royalties will be paid every quarter for the next 23 years.

The mine is majority-owned by FQM, and so royalty fees guarantee that ZCCM-IH will receive payment for the next 23 years even if the mine changes ownership, guaranteeing income that ZCCM-IH can reinvest into other national mines in which it is a majority stakeholder. The government’s goal to increase copper production from 882,000 tons to 2 million tons by  2026 further incentivises a revenue-based royalty.

ZCCM-IH owns majority shares in: Ndola Lime Company Limited (100%); Kariba Minerals Limited (50%). ZCCM-IH also has 100% control of Mopani, thanks to acquiring a 90% shareholding previously held by Glencore Corporation and FQM. It also owns significant shares in Maamba Collieries, Konkola Copper Mines, Copperbelt Energy, Luanshya Copper Mines, Lubambe, NFC Africa Mining, Chibuluma Mines, Investrust Bank and Chambishi Metals.

The agreement also resolves a long-standing dispute over payments between ZCCM-IH and FQM, laying the foundations for improving relations between the two firms.