June 19, 2003

World Bank loan to complete consolidated copper mines privatisation

The World Bank has approved a US $10 million credit to Zambia to complete the privatisation of the Zambia Consolidated Copper Mines (ZCCM). The credit, approved by the Bank's Board of Directors on Tuesday, June 17, will be used to secure a strategic majority share business partner to manage the Konkola Copper Mines (KCM), an economically significant portion of the ZCCM, a Bank statement said.

Anglo American plc acquired the majority share in KCM in March 2000. In January 2002, Anglo announced its intention to sell its stake in KCM, liquidate the company and pay off its staff, or transfer the company to the government. The Bank provided an emergency team to help negotiate the terms and conditions of Anglo's divestment from KCM, arrange for interim financing, restructure KCM to eliminate its debt and enhance its marketability, formulate a revised low-cost operational plan, and arrange for the sale and transfer of the company to another strategic equity partner, the statement said.

"The World Bank responded to the government's request for support to mitigate the adverse economic and social consequences to Zambians of Anglo American's withdrawal, and to ensure the continuance of Konkola Copper Mines as a viable copper producer," said Constantine Chikosi, the World Bank's team leader for the project. A World Bank team of experts in February 2002 presented the government with a set of recommendations to deal with the fallout of Anglo's withdrawal from KCM. The recommendations included accelerated efforts to diversify the economy, starting "as a matter of urgency" in 2002, and the formulation of a business plan to enable KCM to continue operating as commercially viable concern, "without further investment".

The production of copper, Zambia's main export commodity, has been declining since 1970. Output fell from over 680,000 mt in 1970 to 260,000 mt in 2000 as a result of lack of investment and poor maintenance of equipment, erosion of assets and periodic low international copper prices. (IRIN)

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