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By Shapi Shacinda

LUSAKA (Reuters) – Zambia has enough currency reserves to protect the economy in case the illness of President Levy Mwanawasa prompts some reduction in foreign investment, central bank Governor Caleb Fundanga said on Tuesday.

Fundanga said the only slight worry of the Bank of Zambia (BoZ) was rising oil and food prices, which threatened its single digit inflation target. However, he remained optimistic of achieving 7.0 percent annual inflation in December this year.

Fundanga said it was evident the illness of Mwanawasa, who is in a French hospital after suffering a second stroke, had caused anxiety among some investors but that there was “no need for panic”.

“The investors in the mines will continue exporting copper. It is possible that … some investors may decide to pull out, but we have enough reserves, $1.4 billion held by the Bank of Zambia and another $1 billion by commercial banks,” Fundanga told a news conference, adding Zambia had 5.6 months of import cover.

Mwanawasa impressed the International Monetary Fund and other Western donors by cracking down on government spending and launching an anti-corruption drive.

Fundanga said Zambia had investment pledges totalling $1.8 billion so far this year compared with just $1 billion in the first six months of 2007. The government has previously said a number of these investments have been fulfilled.

“Naturally, as a result of the illness of the captain, as some refer to the president, there are some people who might be feeling uncomfortable. Given this situation, are we vulnerable? Will all forex (foreign exchange) dry up? The answer is ‘no’,” Fundanga added.

He said mining and non-traditional sectors had continued to perform satisfactorily with copper export earnings for the three months to June just 0.1 percent lower than the previous quarter’s earnings, at $967.6 million.

Fundanga said non-traditional exports at $187.6 million at end-June were 12.3 percent above the $167.1 million recorded in the previous quarter ending in March.

“Favourable export earnings have led to the strengthening of the external sector reflected in the appreciation of the kwacha against major currencies and a 10 percent increase in international reserves to $1,338.4 billion in June 2008 from $1,216.3 billion in March 2008,” he said.

There were inflationary pressures from a 15 percent wage increase for civil servants from January and from higher global oil prices, which would put pressure on transport and commodity prices.

“However, these pressures may be mitigated by pass-through effects of the appreciation of the exchange rate of the (Zambian) kwacha against major currencies on account of external sector performance,” Fundanga said.

Fundanga said the kwacha appreciated 11.3 percent against the dollar in the three months to June to trade at an average of 3,259/dollar.

“We cannot give up on 7.0 percent inflation at the end of the year because we have enough food to feed ourselves and we will not necessarily be affected by global food prices,” he added.

(Lusaka newsroom + 260-977843609/260-955779523)

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Posted: April 01, 2008 by David Pett

Equinox Minerals Inc. shares were down 10% on heavy volumes Tuesday as Zambia gets set for to raise mining taxes this month.

Zambia began enforcing its new tax code today that will see mining firms pay more in royalties and other taxes despite objections that the government has reneged on tax exemption deals with foreign investors.

All foreign firms in the copper-rich southern African nation are required this month to start paying the higher taxes, including Canadian-owned companies Equinox and First Quantum Minerals. 

Equinox’s copper production is exempt but its future uranium production would be subject to the tax.  

The mineral royalty has increased from 0.6% to 3%. and corporate taxes increased from 25% to 30%. The African country also introduced a 15% variable profit tax on taxable income above 8% and a minimum 25% windfall profit tax.

Equinox shares were down 50¢ to $4.38 at 10:30 a.m. ET, and First Quantum shares were down 3% or $2.57 to $80.67. 

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NEW DELHI: After giving China a tax free zone, the southern African nation of Zambia wants to create a similar exclusive economic zone for Indian companies to bring “value-addition” to its mining industry. “We have had a long partnership in India, with investments in several areas. But what has been lacking was visibility. This zone will help in improving India’s profile (in Zambia),” visiting Zambian Minister for Commerce, Trade and Industry Felix Mutati said.

He said that the offer was specifically drawn up to mark his visit to India for the fourth India-Africa business conclave. “I have not yet told my president of my decision. But we need to make quick decisions nowadays,” he said, tongue-in-cheek. The landlocked African nation, whose economy has been traditionally dominated by copper mining, has already approved two multi-facility economic zones being developed by the Malaysians and the Chinese.

“If the Malaysians can do it, why not India, which is a bigger country,” he asked. Malaysia was the first to ink a deal for a multi-facility economic zone (MFEZ) last year, followed by China, which is currently negotiating an agreement with the Zambians.

The minister said that the Chinese planned to invest nearly $900 million to develop the tax-free zone. “We want the Indian zone to be at least $900 million. If it’s smaller, then it will not have the visibility,” he said, adding that 30 sq km land had already been identified in the central province of Kabwe, about 150 km from capital Lusaka, for the special economic zone.

The Zambian minister said that he would like Indian firms to focus on supply of equipment and processing of raw products. “While we have a lot of mining activity, we have to export all the raw materials for processing outside as there is no proper processing plant,” he said.

Pointing out that Zambia was surrounded by eight nations, who were also mineral-rich, Mutati said: “Our neighbours like Congo, Angola and Mozambique also have active mining industries, which could also be catered by this proposed economic zone.”

He said that he was already in talks with the Tata Group, which had shown interest in setting up a plant in the proposed zone, while another Indian industrial group will be visiting Zambia next week to survey the site. Mutati said that once Indian firms invested in the tax-free zone, they would act as “marketing tools” to attract more Indian investment in other parts of the economy.

Currently, India has a share of 50 percent of Zambia’s mining industry, while the Chinese have 15 percent – courtesy Vedanta Resources’ majority stake in the country’s largest copper mines, Konkola, at a cost of $1.2 billion. The total Indian investment in Zambia is estimated to be $2 billion, with capital flowing in other sectors like banking, health and education too.

While he does not foresee India losing its strong position in the Zambian mining industry, Mutati was clear that China’s “whole new way of doing business” in the continent had to be matched by the Indians. “The Chinese start to work behind the scenes, but they come and make a decision there and then. After that, they start to work backward, asking for data on the projects,” he said.

He cited the example of the Chinese MFEZ in his country to illustrate his point. “They have already constructed 30-40 percent of the buildings, but it is only now that they are negotiating an agreement,” said Mutati. Similarly, he said, the Chinese had announced an investment of $1 billion in the mining sector, but were yet to see the land. “Chinese do and assess, while Indians assess and do,” said Mutati.

He was also appreciative of the Chinese strategy to combine their acquisition of licences for resources with development of infrastructure. “In a neighbouring country, the Chinese have offered to build 3,000 km of road in a swap for a mining concession of 20 years,” he said. “Indian firms need to be more aggressive, otherwise they are losing out,” warned Mutati.

Source: Economic Times

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Zambia expects investment of upto $3 billion this year. Commerce Deputy Minister, Dora Siliya however said the projected investment will only be attained with the full participation of the private sector.

Ms. Siliya was speakingin at a media breakfast organised by the World Bank and the Private sector Development Program.

World Bank Private Sector Development Program Specialist, Sylvia Solf was confident that government will speed up the process of making it easy to conduct business in Zambia.

And Zambia Business Forum Chairman, Pasmore Hamukoma said there is need to acknowledge the political will that government has shown in implementing the Reform programs.

Private Sector Development Program Coordinator, Kayula Siame called on government to address factors acting as a barrier.

Source: Zambia National Broadcasting Corporation

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IMF Report A little too late, Zambian Chronicle Already Warned GRZ
click here: Zambia’s Short To Medium Term Outlook – Extremely Encouraging …
By Shapi Shacinda
LUSAKA (Reuters) – Zambia has made strides in growing its economy but needs to handle commodity price windfalls prudently and develop infrastructure to avert a possible recession, the International Monetary Fund said on Monday.

IMF board members were in Zambia to assess economic progress made since the fund, the World Bank and other western financiers reduced the southern African country’s foreign debt to $502 million in 2006 from $7.1 billion.

“We acknowledge that despite the impressive economic performance and positive medium term outlook, challenges and risks remain,” the IMF directors said in a statement after a meeting with President Levy Mwanawasa.

Zambia’s economy has grown by an average 5 percent in the past six years and it has brought inflation to single digits for the first time in three decades.

The Fund said Zambia needed to manage windfall from higher commodity prices wisely to maintain steady economic growth. Copper mining is the cornerstone of the Zambian economy.

Video Clip Add By Us – Underground Mining in Chingola

“We would note two important challenges … the first being how to manage the macro impact of large foreign exchange inflow,” said Miranda Xafa, an IMF director.

“You certainly do not want to get into a boom (and) bust cycle that others have found themselves in, in that while the boom and bust lasts, they try to spend it all at once and while commodity prices fall, they slow down in possible recession.”

Treasury data showed Zambia received nearly $1.5 billion in foreign direct investments while earnings in copper exports were around $4.7 billion in 2007.

“The second challenge is building the infrastructure and removing impediments to private sector development . . . to improve the business climate by facilitating investments and growth,” Xafa said.

The IMF also discussed a new financing package of a “small” undisclosed amount with Zambia after the expiry of the $320 million three-year poverty reduction growth facility.

The IMF warned Zambia about managing its debt.

“We are aware that the government is now seeking a sovereign credit rating that will facilitate access to international capital markets and we are confident that the government will use these funds wisely,” Xafa said.

“We would caution that after this debt forgiveness, it is important to maintain debt sustainability by using non-concessionary borrowing to finance viable projects (that) have a rate of return high enough to justify the borrowing.”

Mwanawasa told the board members that Zambia would continue with prudent macroeconomic management and economic reforms to attract further foreign direct investments.

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ben-ali.jpgZine El Abidine Ben Ali was born on September 3, 1936 in Hammam-Sousse, to a family of moderate means, which brought him up to respect tradition and imbued him with a sense of dignity, patriotism and respect for others.

From these values he developed a propensity for simplicity, hard work and rigor, as well as a sense of moderation and tolerance. While still in the Sousse secondary school, Ben Ali responded to the call of patriotic duty.

Outraged by colonial oppression, he became active in the nationalist movement, acting as liaison between the regional structures of the Neo-Destour Party and the armed struggle. As a result, he was imprisoned and excluded from all educational establishments in Tunisia.

Yet he did not give up his studies and soon resumed them with enough energy and determination to persevere into tertiary education after completing high school. Recognizing Ben Ali’s outstanding qualities, the party sent him abroad to pursue his higher training as part of a group that was to form the nucleus of the future national army.

He first graduated from the Special Interservice School in Saint-Cyr (France), then from equally prestigious schools: the Artillery School in Châlons-sur-Marne (France), the Senior Intelligence School (Maryland, USA) and the School of Anti-Aircraft Field Artillery (Texas, USA).

He also holds a degree in electronic engineering.“My interest in computer science,” he was later to say, “has had a considerable impact on the way I work, giving me a definite taste for Iogic, rigorous analysis and long-term planning which shuns improvisation.”

The second stage in Ben Ali’s career was marked by a steady increase in responsibilities, due to his sense of duty, his readiness to Iisten to others and his capacity for rigorous analysis. Prior to making any decision, he would carefully consider available information, analyze situations and compare results.

Once the decision is made, he personally sees it through to a successful conclusion thanks to diligent action and close follow-up.Summarizing this process to an American newspaper, he said in a nutshell: “I listen, I ponder, I act.”

In 1964, while still a young staff officer, he created the Military Security Department which he directed for 10 years. ln 1974, he was appointed military attaché to Morocco and Spain. He was then assigned to the office of the Defense Minister before becoming Director General of National Security (December 1977).

In April 1980, he was appointed Ambassador to Warsaw. At the end of his tour of duty in Poland, he returned to Tunisia in 1984, to serve, first, as Director General, then as Secretary of State (October 29, 1984), then as Minister of National Security (October 23, 1985). On April 28, 1986, he became Minister of the Interior, and in June of the same year a Member of the Political Bureau of the Socialist Destourian Party (PSD).

He was soon appointed Assistant Secretary General of the PSD. Promoted to the rank of Minister of State in charge of the Interior in May 1987, he was appointed as Prime Minister on October 2, 1987, at the age of 51, while keeping the Interior portfolio.

By the same token, he became Secretary General of the PSD.President Habib Bourguiba at the time was weakened by old age and illness, and was surrounded by seraglio intrigues. Ben Ali, however, remained above rivalries, and acted rather to ease the political climate, to promote openness to organizations such as the Tunisian League of Human Rights and to establish contacts with opposition parties.

This won him the sympathy and respect of the entire political class, which considered him a man of dialogue and openness.As Prime Minister, Ben Ali took charge of a country in crisis. He confronted the situation with determination, foiled intrigues and took endless calming measures.

He strove to restore confidence, advocated logical and realistic solutions, and invariably made the higher interests of Tunisia prevail. During that disturbing period, President Bourguiba was increasingly subject to frequent lapses and was eventually disconnected from the realities of the country.

On the strength of a medical report drawn up by seven specialists treating President Bourguiba, attesting to the latter’s incapacity, and by virtue of Article 57 of the Constitution, Prime Minister Zine El Abidine Ben Ali assumed the highest executive office on November 7, 1987.

The ensuing transition went smoothly and in full respect of constitutional legality, and the former president was treated with all due respect.From the moment of his investiture, President Ben Ali has made every effort to honor the commitments contained in his Declaration of November 7th: rule of law, sovereignty of the people, national reconciliation, respect for fundamental freedoms, democracy, pluralism, social justice, solidarity, hard work, openness and modernity.

This program received the support of the overwhelming majority of Tunisians as it met their expectations.First of all, Ben Ali restored the vitality and credibility of the old Socialist Destourian Party (PSD), which had fallen into lethargy.

Renaming it the Democratic Constitutional Rally (RCD), he renovated its structures, modernized its action methods and reformulated its discourse. The RCD opened up to the young, renewed its cadres, and restored free debate and a sense of initiative for the rank-and-file. This reinforced its credibility and its grassroots outreach, and widely enlarged its constituency.

On the political plane, a climate of détente and national concord set in and numerous measures were taken to establish true democracy and lay the groundwork for the rule of law. The Constitution was amended to do away with lite presidency and automatic succession.

The Economic and Social Council was re-structured, its prerogatives extended and its representation broadened to promote national consensus on major development options. A Constitutional Council was created soon after the Change of November 7th to guarantee, in both letter and spirit, the constitutionality of the laws.

In 1998, a constitutional law provided that the opinions of the Constitutional Council be binding on all powers and all authorities.Freedom of expression was guaranteed, and the Press Code amended three times to modernize and liberalize public reporting conventions, and to provide journalists with adequate conditions to exercise their profession.

Specific measures were taken in favor of the opinion press. A new reform of the Press Code was announced in 1999.A new law on parties was adopted in 1988. It redefined the procedure governing the establishment of political groups, giving pluralism a new impetus and an irreversible character. The early presidential and general elections of April 2, 1989 were the first in the country’s history to take place in absolute transparency and perfect conformity with the law.

As a candidate of all Tunisians, across party fines, Zine El Abidine Ben Ali was elected that year President of the Republic. The consensus in support of President Ben Ali was confirmed by his re-election on March 20, 1994, and on October 24, 1999, with a very large majority.

The amended Electoral Code also promoted the multi-party system in the 1994 general elections, as it enabled, for the first time since Tunisia’s independence, the entry of the opposition into the Chamber of Deputies.

The introduction in 1998 of new amendments into the Electoral Code allowed the opposition to win 20% of the seats in the Chamber of Deputies after the legislative elections held on October 24, 1999. The opposition won the same proportion of seats in the municipal elections held in the year 2000.

Other amendments lowered the minimum age of candidates for the office of Deputy and guaranteed the right to run for office for all electors born of a Tunisian mother while, previously, only the elector born of a Tunisian father could be a candidate.

The Constitution was also amended to allow for several candidates to run in the country’s presidential elections. For the first time in Tunisia’s history, the incumbent president was challenged by opposition candidates, during the elections held on October 24, 1999.

President Ben Ali made Tunisia a pioneer country in the protection of human rights, seeing to the implementation of a comprehensive policy combining economic, social and cultural rights with civil and political rights.Just two weeks after the Change, a bill laying down the rules for pre-trial custody and preventive detention was adopted.

The State Security Court and the office of State Prosecutor were abolished and so was hard labor.The 1984 United Nations Convention against Torture and other Cruel, Inhuman and Degrading Punishments or Treatments was ratified without reservation. The rights of the child are now protected by law, and the culture of human rights is promoted and widely disseminated.

A new law was enacted in 1999 with the aim of reducing the period of pre-trial custody, instituting public service work as a sentence instead of imprisonment (provided that the convicted person accepts it freely); and defining torture according to international standards.

The purpose of the law was to harmonize national legislation with the relevant United Nations Convention which Tunisia had ratified unreservedly. Moreover, a bill was submitted to the Chamber of Deputies to establish the rule of dual jurisdiction in criminal cases and to create the position of magistrate in charge of the implementation of sentences.

Authority over detention facilities and their administration were also transferred to the Ministry of Justice. Since November 7, 1987, President Ben Ali has expressed his unwavering commitment to the emancipation of women and his determination to further women’s rights.

The National Pact, a culmination of the national reconciliation drive engineered by Ben Ali, was endorsed by all the country’s political and social tendencies and currents, thus sanctioning national consensus. A general amnesty law was decreed.

President Ben Ali announced, on February 13, 2002, the introduction of a major constitutional reform bill aimed at consolidating the bases of the republican system of government, further anchoring democracy and promoting human rights and public freedoms. The proposed reform is considered the broadest and most far-reaching in the history of post-independence Tunisia.

The reform bill gives a high profile to human rights and freedoms within the body of the Constitution, consecrates pluralism in presidential elections, and introduces a greater role of Parliament in the oversight of government activity, while preserving the characteristics of the presidential system of government.

Among the other provisions of the reform bill is the creation of a second legislative body beside the Chamber of Deputies. The reform bill broadens the role of the Constitutional Council, consolidates its independence and entrusts it with the task of monitoring presidential and legislative elections at all stages.

Based on his deep belief in the will of people as an over-riding imperative, President Ben Ali decided to submit the bill, after its adoption by Parliament, to a popular referendum, so as to make sure that the intended reform truly reflects the people’s choices and aspirations.

To put the country back to work, President Ben Ali succeeded in clearing the social climate by rehabilitating the Tunisian General Labor Union (UGTT), instituting dialogue between management and labor, and making labor a cardinal value.

This was done out of the conviction that there cannot be any social justice or progress without the creation of wealth and without a concerted effort to ensure production and creativity.The economic reforms introduced against this background have enabled the country to achieve a sustained economic growth rate of about 5 percent and to lower the inflation rate to 2.7 percent.

A national program for modernization and upgrading of the industrial fabric has been developed in collaboration with the European Union, with which Tunisia signed an association and free-trade agreement in 1995.

The country’s modern infrastructure, favorable legislation and climate of stability and growth have attracted an increasing number of foreign investors. The economic success of the Tunisian model is recognized all over the world and some observers have even called it “the Tunisian miracle.

In June 2000, Tunisia was ranked as the most competitive country in Africa by the World Economic Forum 2000-2001 Report. in 2006, it reiterated the,feat by being ranci ed.as the most competitive country in Africa and in the Arab world by the same WEF. For period 2007-2008 Tunisia still took first place in Africa.

No doubt the humanistic approach to social realities will prove to be one of the dominant features of President Ben Ali’s personality and record. A man of the people, he constantly listens to citizens, and espouses their concerns and expectations. What he has accomplished in this respect is based on a genuine sympathy with the underprivileged and a rejection of exclusion, together with investing in disadvantaged regions and creating equal opportunities for all.

As a result, the poverty rate has been lowered to 4.2 percent and the middle classes now account for 80 percent of the population. Thus it is deep appreciation, even affection, that Tunisians feel when they see their president making impromptu visits to deprived districts, steep mountain areas or social, educational and economic institutions.

Ben Ali strives to give concrete expression to the concept of national solidarity, which is the foundation of his social policy. His visits are invariably followed with immediate action, sometimes in the form of a cabinet meeting the same day, which he chairs in person, to make appropriate decisions.

It was after such a visit to one of the remote areas of the country in December 1992 that the president decided to create the National Solidarity Fund, commonly known as “26-26 Fund” after its bank account number.

This decision was warmly welcomed by Tunisians, who demonstrated their solidarity by responding to the appeal of the president with generous donations to the fund.The mission of the “26-26 Fund” is to end isolation, improve living conditions in deprived areas and enable their inhabitants to undertake income-generating projects.

Building on the exceptional success of this fund in fighting poverty, a new fund, the National Employment Fund, also known as the “21-21 Fund”, has been launched for the purpose of creating job opportunities.In addition, the creation of the Tunisian Solidarity Bank and the establishment of a micro-credit system have made it possible to finance thousands of small projects every year, create jobs for young graduates and promote enterprise.

The educational reform which made school attendance compulsory until the age of 16, has raised the schooling rate for 6 year-old children to more than 99 percent, fostered openness, tolerance and innovation, and has further promoted equality between men and women.

Such equality has been reinforced by a host of avant-garde measures taken by Ben Ali. The Code of Personal Status, one of the most advanced in the world with respect to women, has been strengthened and gender equality is now a feature of daily life. After the 1999 legislative elections, the number of women in the Chamber of Deputies has virtually doubled.

As a result of the numerous presidential initiatives in favor of women, and particularly the measures of August 13, 1992, Tunisian women, more than just having their gains and basic rights guaranteed, became full partners to men in all fields of development.On the foreign plane, President Ben Ali has instituted an active and dynamic diplomacy.

Working for the integration of the entire Maghreb, the establishment of an inter-Arab consensus and the creation of a Euro-Mediterranean area of co-development, Ben Ali is actively contributing to the search for a just and lasting peace in the Middle East. His chairmanship of the Organization of African Unity highlighted his commitment to seeking negotiated solutions to the conflicts afflicting the continent and to preventing new ones.

In September 2000, the UN General assembly adopted this humanitarian project, paying tribute to this initiative which aims at establishing a mechanism for the consecration of universal values and ensuring a better future for the whole mankind.

UNESCO’s designation of Tunis as Regional Cultural Capital in 1997 marked Tunisia’s growing cultural influence and its ability to contribute to dialogue among civilizations. At the instigation of its president, Tunisia’s entry into the arena of new communication technologies has been facilitated by numerous government incentives.

All universities and high schools are connected to the Internet. A program has been launched to connect public libraries to the worldwide web.In 1998, upon an initiative of Tunisia’s President, the International Union of Telecommunications( ITU), an organization affiliated to the United Nations, decides to hold a World Summit on the Information Society.

The Summit took place in two distinct phases, being hosted by Geneva in 2003 and Tunis in November 2005. By many accounts, the Tunis Summit which is also known as the ” Summit of solutions” was a tremendous success both at the organizational and the conceptual levels. It will be crowned by the adoption of two major texts: the ” Tunis commitment” and the ” Tunis Agenda”.

President Ben Ali is married and is the father of six children. His wife, Mrs Leila Ben Ali, is active in a number of Tunisian and international charities, working to promote the causes of women, families and children.

The other presidents in the running included Zambian President and current Chairperson for SADC nations, Dr. Levy P Mwanawasa, SC. who came in second, Namibian President Nifikepunye Pohamba in third place, President Armando Guebuza of Mozambique in fourth place, President Mamaduo Tandia of Niger for fifth classy-daddy-3.gifplace, President of Botswana Dr. Festus Mogae in sixth and President John Agyekum Kufuor of Ghana as seventh …

Special thanks go to our friends at Tunisia Online, the World Economic Forum, The Global Peace Index Group, Global Competitive Index Group, Economic Times, Time Magazine, Financial Times, CBS, WSJ Online and many others too numerous to mention … thanks a trillion. Brainwave R Mumba, Sr.

CEO & President – Zambian Chronicle

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Jayanta Mallick

Kolkata, Nov. 30 Aditya Birla Group is keen on Zambian copper mining assets, particularly Luanshya and Baluba, which were once taken over by London-based NRI metal trader Mr Gokul Binani in 1997 from the State-owned Zambia Consolidated Copper Mines Ltd (ZCCM) but who after a few years made a messy exit, after which the operating company went into liquidation.

Speaking to Business Line here on Friday, Mr Debu Bhattacharya, Managing Director of Hindalco and the top official in base metal operations, confirmed that. “We are closely looking at the mining assets in Zambia,” he said, and added that an evaluation process was on.

The Luanshya and Baluba mines produced 48,345 tonnes of copper in concentrate and 1,216 tonnes of cobalt in concentrate during the financial year ended March 31, 1997 before privatisation. The assets are now under receivership of Grant Thornton.

Mr Bhattacharya, who is also Vice-Chairman of Novelis Inc, said that the group was looking for opportunities in South America too to pick up copper mining assets. “Not many such assets are available for acquisition worldwide currently,” he said, and indicated that a number of copper mines in Columbia, Peru and Argentina were on the group’s radar.

The group is aggressively attempting to enhance its copper resource ownership in relation to the in-house finished capacity.

“Though we have adequate long-term coverage in bauxite, our current coverage in copper is around 40 per cent, which we now target to increase it to 60 per cent,” he said, without specifying a timeframe. All the group’s applications for fresh bauxite mining rights were at an “advance stage” of processing.

Novelis legacy losses

Mr Bhattacharya said the losses on account of legacy contracts incurred by Novelis Inc before acquisition, could be wiped out fully within a year. Novelis, now part of the Aditya Birla group, had incurred losses of about $120 million associated with its legacy contracts during the first six months of 2006.

In an SEC filing, the US company in August 2006 had admitted that “depending on the fluctuations in metal prices for the remainder of 2006 and other factors, we may continue to incur losses on sale under these contracts”.

Mr Bhattacharya said after the takeover that the financial performance of Novelis, particularly related to costs, has been showing signs of improvement. The accounting year of Novelis has been changed to April-March from January-April to align it with that of the group.

No Re-$ parity risk

He said that neither Hindalco nor Novelis was affected by the sharp increase in rupee against the dollar this year because of two reasons — full cost pass-on to the buyers and absence of cross subsidisation in case of intra group transactions of metal and material.

He felt aluminium was in an upward leg of a long-term cycle and the current cycle could be better than the previous one.

Source: Hindu Business Line

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