Invesco Canada blog

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Norman MacDonald | April 4, 2014

Zambia: On the ground research

About 3,000 kilometres north of Cape Town sits Lusaka, Zambia, home to numerous copper and heavy metal mines as well as other resource-development projects. I headed there to see first-hand the status of a new open pit mine that one of the companies we hold is excavating. Like South Africa, Zambia is a country that, while blessed with substantial investment opportunities, is also rife with barriers to investing. To complicate matters, there are many widely held misconceptions about both the investment opportunities and risks present there.


Zambia is home to some of the largest copper mines in the world, with new deposits being discovered all the time. This means investment opportunities for heavy metal mining companies in the country are growing rapidly. So, when a mining company I either own or am interested in makes it known they’re increasing their operations or building a new mine, reading this data on a spreadsheet simply doesn’t give me the 360 degree view I need to make a fully informed decision.

For example, before I visited the open pit mine, company management told me about a new smelter (the facility where metals are extracted from their ore) that’s slated to be operational by the end of 2014. Having first read about it in an e-mail, a delay with the smelter had me concerned. Seeing the project in person meant I could confirm whether the delay would prove material, making further investment undesirable, or if it was simply a timing delay. In this case it wasn’t a deterrent, and certainly didn’t change my investment thesis about the company.

When you’re on the ground, you can easily distinguish the major issues from the minor ones, because you eliminate a lot of the noise coming from the market.


As I mentioned in part 1 of this blog (Is South Africa a “gold mine”?), there have traditionally been barriers to investing in Africa. What surprised me in Zambia was the local opposition to mining I encountered, as well as issues with the country’s power grid. On the flip side, the company I was there to visit is going above and beyond the call of duty by constructing a power project to help resolve the issue, with plans to sell electricity back to the Zambian government. They’re doing much to be a good corporate citizen and make a meaningful contribution to the country.

Investing in these types of “frontier” markets underscores the importance of the Trimark discipline, which emphasizes on-the-ground research as an important aspect of the overall investment process. Gaining a true understanding of the actual conditions companies face as well as the political and social climate they operate in allows us to really understand them and make the best investment decisions possible.

I look forward to uncovering more investment opportunities in Africa, and in about two years – or sooner depending on the prospects at hand – I’ll head back on another due diligence trip.

As always, if you have any questions about this post, feel free to leave a question below or via e-mail.

Learn more about the Trimark Investments team.

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