RBC recently hosted a Central African Copperbelt Conference in Toronto, New York and London. Despite turbulent market conditions, the conference was well attended and received. Attendees commented on the quality of the presentations and the overall theme of the conference. The standouts were highlighted as being the “in conversation with” First Quantum and Katanga. The Central African Copperbelt, in RBC Capital Markets’ opinion, offers one of the most exciting investment opportunities in the mining sector. The Copperbelt, consisting of the DRC and Zambia, is currently experiencing a revival and RBC Capital Markets estimates it will be the second largest copper producing region in the world by 2011. Despite socio-economic problems, political issues, infrastructure and power constraints, RBC Capital Markets believes that strong copper demand and outstanding geological characteristics will be the driving force in returning the region back to the glory days of old.
In the DRC Mining Licence Review, negotiations are underway for near-term resolution. This appears to be drawing to a close. Negotiations with the Ministry of Mines and Gecamines are currently taking place and some of the CEOs of presenting companies were unable to attend the conference because they were attending meetings in the DRC. Many of the presenting companies were relatively confident of seeing a favourable resolution but were obviously unable to give specifics at the time. It was obvious that they were all pleased and relieved to be nearing a resolution after such a long period.
Despite the recent death of the President, negotiations on Zambian tax reforms ihave in fact continued at a decent pace. RBC Capital Markets had previously forecast that t would not see a resolution until after the general election, expected later in the year. However, presenting companies indicated that negotiations may be concluded before this. The Zambian government recently requested that companies should not pay any additional taxes, such as windfall tax, until the matter is resolved.
Presenting companies outlined their development plans and expansions. The production growth of the region is quite staggering, with RBC Capital Markets’ estimates showing peak production of 2 Mt of copper in 2013 and 74,000 t of cobalt in 2015. Consolidation was one of the key themes and many companies highlighted the potential opportunities. Clive Newell, President of FQM stated that they were presented with more opportunities than he can remember in his 30 years in the industry. RBC Capital Markets believes Dan Gertler may be the catalyst for consolidation in the DRC Copperbelt.
A number of challenges were highlighted by presenting companies, including power, infrastructure, acid availability and smelter capacity. Power seemed to be the biggest challenge especially for Zambia, where intermittent power is affecting production.