Mining states smelter economics drive shift toward regional value chains

Africa Mining

Mining states smelter economics are reshaping how resource-rich governments think about value addition and industrial policy. At the FT Metals and Mining conference, African and Middle Eastern officials outlined ambitious mining growth plans while acknowledging tough smelter economics. As a result, they increasingly favour flexible regional chains, trading platforms and targeted downstream moves over politically symbolic but uneconomic smelter projects.

Zambia and Saudi Arabia recalibrate mining growth and downstream strategy

Mining states smelter economics sit at the heart of Zambia’s long-term copper strategy. The government is holding to its 3mn t/yr copper target by 2031 but plans to stay out of smelter investment decisions. Instead, Zambia will focus on policy tools such as export waivers and a state-run trading house from Lusaka. These mechanisms aim to manage excess copper concentrate and attract private capital into processing where returns justify risk.

However, Zambia still needs major capital commitments to reach its copper goals. The country produced 840,000t of refined copper last year and expects to exceed 1mn t in 2025. To close the gap with its 2031 ambition, Zambia is relying on projects like First Quantum’s $1.25bn Kansanshi expansion and other greenfield or brownfield investments. Therefore, mining states smelter economics will influence whether future capacity focuses on concentrate exports, tolling deals or selective domestic refining.

Meanwhile, Saudi Arabia is building mining into its third economic pillar under Vision 2030. The kingdom wants to raise sector GDP from $35bn to $75bn by 2035, with 70pc from downstream activities. It is rolling out a fully integrated aluminium chain, planning to triple phosphate output by 2040 and constructing a battery metals trading platform. These moves show how mining states smelter economics can support more sophisticated value chains rather than simple ore exports.

Saudi Arabia is also using international deals to secure feedstock and technology. Its PIF-backed Manara Minerals JV is investing abroad, while the kingdom builds rare earth links with partners such as MP Materials and explores refinery projects with global miners. As a result, the country is positioning itself as a regional processing and trading hub, rather than relying solely on domestic ore extraction.

Regional chains rise as smelter economics and policy risks bite

Mining states smelter economics are driving governments to prioritise regional infrastructure over isolated national hubs. Guinea’s $20bn Simandou iron ore project illustrates this shift, combining Chinese rail capacity, US locomotives and French signalling in a single integrated corridor. This model aligns with calls from industry leaders to optimise at regional scale, where transport, energy and port infrastructure can support multiple producers and customers.

However, building new smelters remains challenging when copper treatment charges sit at historically weak or even negative levels. Industry voices argue that in-country smelting often “doesn’t pay” in today’s market, especially once high power costs and carbon considerations are included. Therefore, mining states smelter economics are pushing policymakers to abandon hopes of easy “green premiums” and focus instead on cost competitiveness and stable regulatory frameworks.

At the same time, state miners are exploring commercial tools to capture more value without over-investing in heavy assets. In the Democratic Republic of Congo, Gecamines plans a dedicated trading arm to market its 20–49pc joint-venture production share. The company wants to revive its own brand, sharpen market knowledge and improve pricing power. If logistics and finance constraints ease, executives believe the firm could “easily” join the top tier of global copper operations.

The Metalnomist Commentary

The debate around mining states smelter economics is shifting from ideology to hard numbers. Resource-rich governments increasingly recognise that modern value chains may rely more on trading hubs, corridors and selective downstream assets than on politically attractive but uneconomic smelters. For investors, the most attractive jurisdictions will be those that match geological potential with pragmatic policies on infrastructure, energy and fiscal stability.