1. How Can Zambia Improve the Competitiveness of its Mining Industry and Increase the benefits from Copper? May 2010 Frank Russell Sunil Sinha Supported by the World Bank, DFID, and AfDB Jobs and Prosperity – Building Zambia’s Competiveness (JPC)

2. Agenda  Global Prospects for Copper  Copper still has much to offer Zambia  How Attractive is Zambia for investment?  How Competitive is the Zambian Industry?  What role can Mining play in Zambia’s prosperity?  What is needed to realize the Potential?

3. Strong international demand 1 million tonne p.a. growth = annual output from Zambia

4. Driven by growth and urbanisation in emerging markets Source: UK Population Division, Deutsche Bank Research, Global Insight, JP Morgan research

5. Will cause supply shortfall

6. Potential for long term Copper price to be high (with short term volatility) Qtly Avs Q1 09 – Q1 10 (Annual Averages adjusted by US GDP Deflator 2005 = 100)

7. Agenda  Global Prospects for Copper  Copper still has much to offer Zambia  How Attractive is Zambia for investment?  How Competitive is the Zambian Industry?  What role can Mining play in Zambia’s prosperity?  What is needed to realize the Potential?

8. Rapid growth, market share recovering Copper output at 1970s level- 700,000 t/year Growing at about 8% a year World market share recovering

9. Zambia 7th in world copper production, improved from 11 th place Source: Reuters, 2009

10. Zambia has not maximised mining’s contribution  Major industry, leading growth  Major export > 80% value BUT  Contribution to revenue low (1%-1.5% GDP) though likely to increase  Employment <50,000  Few supply linkages Source: ZamStat

11. Agenda  Global Prospects for Copper  Copper still has much to offer Zambia How Attractive is Zambia for investment?  How Attractive is Zambia for investment?  How Competitive is the Zambian Industry?  What role can Mining play in Zambia’s prosperity?  What is needed to realize the Potential?

12. Mining companies will wish to invest where returns are highest Mining companies will invest – new technology opens up low grade deposits Will invest where risk adjusted returns highest: Good investment environment Competitive industry – investment decisions made at $4400/t ($ 2/lb) even if prices forecast to remain higher.

13. Zambia has the copper resources to attract investment 6% of world copper resources 2.8 billion tonnes resources at existing mines Additional resources outside Copperbelt 40% of country not surveyed Will require: – Exploration investment – New mining investment – New technology

14. New resources outside Copperbelt Mumbwa

15. Influential industry surveys rank Zambia in bottom third of where to invest Zambia ranks 18/25

16. Closer look at the Behre Dolbear ranking Economic system Political system Social issues Permitting delays Corruption Currency stability Tax regime Total points Australia10988 8760 Chile987787450 Ghana663746638 Namibia563545634 Tanzania553734532 Zambia 542532425 DRC233311417 Highest score possible is 70, Australia scores highest. Zambia’s score has fallen from previous year