VZCZCXRO1690
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHLS #0444 1091055
ZNR UUUUU ZZH
R 181055Z APR 08
FM AMEMBASSY LUSAKA
TO RUEHC/SECSTATE WASHDC 5720
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RHMFISS/HQ USAFRICOM STUTTGART GE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS LUSAKA 000444 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
FOR AF/EPS, AF/S, EEB/ESC/IEC 
 
E.O. 12958: N/A 
TAGS: EMIN EINV EFIN ZA
SUBJECT: U.S. MINING MAJOR ON NEW TAX AND LEGAL REGIME IN 
ZAMBIA 
 
REF: A. LUSAKA 396 
 
     ¶B. LUSAKA 376 
     ¶C. LUSAKA 349 
 
1.(SBU) Summary: Representatives of Freeport McMoRan/Phelps 
Dodge Mining Zambia (FM/PDMZ) said that the new tax and legal 
regime for mining projects introduced in early 2008 by the 
Government of Zambia "dampens...enthusiasm" for pursuing 
projects in Zambia, but would not cause the company to pull 
out of current prospecting activities.  End summary. 
 
¶2. (SBU) Will Wilkinson, Vice President, Africa, Freeport 
McMoRan Copper & Gold, which as of 2007 owns Phelps Dodge 
Mining Zambia, and Dudley Barker, a consultant who represents 
the company in Zambia, told P/E Chief and Deputy Chief on 
April 17 that they agreed with the views of other mining 
firms operating in Zambia (Reftels).  The way in which the 
new tax regime and mining development law were imposed -- 
unilaterally, without any industry consultation -- was 
troubling.  At the same time, they noted that they 
appreciated the GRZ's interest in tapping more benefits from 
high copper prices for the people of Zambia. 
 
¶3. (SBU) Wilkinson commented that the new tax and legal rules 
"dampens our enthusiasm" for Zambia, which has had a business 
environment that until now had always compared favorably to 
that in the Democratic Republic of Congo.  He stated that the 
new regime "raised the bar" for the pursuit of future copper 
mining projects, and changed the economics of a go or no-go 
decision--simply put, lower quality copper discoveries that 
are more costly to produce will not be developed. 
 
4 . (SBU) Although it used to hold major interests in the 
Lumwana and Kansanshi Copper Mines in North Western Province, 
FM/PD is not active at present in copper mining or 
production.  It has two prospecting licenses in the North 
Western Province, one in the remote area of Kapombo near the 
Angola border, and another northeast of Kansanshi Copper Mine 
(Refs) near the border with the DRC.  FM/PDMZ also has a 
partnership with U.K. mining junior African Eagle Resources 
to prospect in an area near Ndola, on the traditional 
copperbelt. 
 
¶5. (SBU) Barker, a U.K.-born, long-time Zambian resident with 
extensive mining sector experience, voiced concerns about the 
long-term viability of copper mining in Zambia.  Slumping 
copper prices could wreak havoc on the sector, he warned. 
 
MARTINEZ