Glencore halts production at DRC copper mine
THE BEER flowed at a dimlylit bar in the Democratic Republic of Congo (DRC) copper mining town of Kolwezi, but it did little to lighten the mood.
Since the commodity price slump rippled out to the remote corners of Africa that hold some of the world’s most important metals supplies, thousands of mine workers in Kolwezi have been fearing for their future.
Production at the Katanga mine there has been suspended since September as its owner, Glencor, responds to a more than six-year low in copper prices, and the last ore has been trucked away. Katanga represents a test of whether the company’s copper mining operations can adapt to weak prices. Glencore plans to re-engineer the site, so it can resume output at a lower cost in early 2017, and success will help reassure its investors that the firm can ride out a long commodity downturn.
The mine said in September that it planned to cut a fifth of its about 5 000-strong workforce, at most. But more than 1 000 workers have already taken up an offer of compensation to walk away.
“People think that if they don’t accept the money now, the company will cut more jobs later and they’ll lose the opportunity,” said employee Deogratias Twite, at Chez Laure bar, speaking over a blast of music from the courtyard outside.
Basil Mwangala Mdala, a 45-year-old electrician, said he was offered an $11 000 (R158 300) buyout, but turned it down.
“What am I going to do with $11 000? I have all of my family here. I have responsibilities as a parent… The misery has begun.”
The sombre assessment jars somewhat with the message to investors from Glencore’s headquarters in the wealthy Swiss tax haven of Zug.
The mining and trading group has been built up through years of rapid expansion, and is now one of the world’s biggest metals mining houses. But fears it may run out of cash sent its shares tumbling earlier this year and forced chief executive Ivan Glasenberg to issue new shares and rein in debt and capital spending.
Africa accounts for about a third of Glencore’s copper output, and Katanga – located in the south of the DRC – was one of its biggest producing mines on the continent before its suspension. Even as work tails off at the operations in Kolwezi, the town will remain the focus of fevered activity during next year as Glencore upgrades the mine. The upgrade will include a new leaching plant that Glencore said would allow the site to process ore more cheaply.
But it has not given any more detailed plans on how it aims to cut costs at the mine – which is owned by Kamoto Copper Company, a joint venture between Glencore-controlled Katanga Mining and Gecamines, the state mining company .
The creeping mechanisation feared by some workers may play a part, but so may an increase in production that would cut fixed costs.
Glencore said it could slash Katanga’s production costs to about $1.65 per pound – from more than $2.50, or $5 510 a ton. The operation has been clearly loss-making at the current copper price, which hit $4 443.50 a ton on November 23, its lowest in more than six years. Its more efficient Congo site of Mutanda – where production costs $1.33 a pound, or $2 930 a ton – has stayed open.
KCC has targeted annual production of 300 000 tons since 2011, but its record output has been just 158 000 tons, seen last year. By moving to slash costs while the mine was mothballed, Glencore’s idea was to “hope for the best and prepare for the worst”, said Bernstein Research analyst Paul Gait. – Reuters