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By Shapi Shacinda
LUSAKA, Dec 29 (Reuters) – Zambia has asked foreign mining firms to use profits they made when copper prices were high to keep working in the downturn, its central bank chief said on Monday after Luanshya Copper Mine (LCM) suspended operations.
Bank of Zambia (BoZ) governor Caleb Fundanga expressed optimism that copper prices would soon rebound but said the developments at LCM were a threat to the country’s copper industry.
LCM shut down its Chambishi Metals Plc unit, the country’s largest cobalt producer, and the Baluba copper mine soon after suspending the $354 million Mulyashi copper project, which had been due to start producing 60,000 tonnes of copper in 2010.
It cited operational difficulties arising from the global credit crunch as reasons for the decision.
“The fact that there has been a low copper demand and prices have seen a downward trend is a development with lots of implications. However, (mining firms) must be able to weather the storm, it’s a bit too early to leave (and) it’s not too good to leave in a rush,” Fundanga told Reuters.
World copper prices have dropped by almost two-thirds from the July all-time high of $8,940 a tonne.
“The normal thing is to rely a little bit on their reserves, business is all about risk and you cannot be a good businessman if you threaten to pull out in times of trouble,” he said.
Industry analysts say most copper mines, the southern African country’s economic lifeblood, have also slowed down expansions and upgrades following the global financial crisis.
The crisis has hit the industry on the back of low copper demand and declining prices. There are fears some investors may consider pulling out of the country.
Fundanga said Zambia remained optimistic the global economy would stabilise soon and demand for copper would begin to rise to give relief to the industry, which earns Zambia 63 percent of its foreign exchange.
“In 2002, Anglo American pulled out of Konkola Copper Mines (KCM) citing low copper prices, but soon after prices rose and this is likely to happen again,” Fundanga said.
Fundanga said the other way Zambia would mitigate the effects of falling copper demand and prices was by diversifying its economy to other sectors such as agriculture and manufacturing of copper products.
“We (will) diversify into manufacturing of copper cables and other products,” he said. (Reporting By Shapi Shacinda, editing by Anthony Barker)