Following months of speculation on the fate of one of Zambia’s mines, clarity through an announcement from the Minister of Mines has been given regarding how the fate of one of the countries oldest mines will be dealt with.
Earlier in 2019, Glencore announced in May 2020 that it would be ceasing operations at the Mindola North Shaft and Central Shaft because “they were reaching the end of their economic life“, according to an email statement that was sent by the company and published on africanminingmarket.com published on May 13, 2019. This was the earliest signal that the mining giant expressed intentions of walking away from the asset.
Fast forward to July 2020 and the advent of Covid-19, Zambia’s mines ministry rejected Mopani’s proposal to suspend copper mining operations despite a decline in the metal prices due to the COVID-19 crisis, according to Reuters.
A few weeks later, Reuters then reported that Glencore PLC was expected to sell all of its 73.1% interest in Mopani Copper Mines PLC to Zambia’s state-owned ZCCM Investments Holdings PLC, or ZCCM-IH, instead of becoming a minority shareholder citing two sources with direct knowledge of the negotiations.
Tracking the progression of negotiations between the Government and Glencore, it was indicative of discussions that sought an amicable solution to the issue of the transfer of assets. According to an article published on yahoo finance.com, “Glencore wrote off the value of Mopani by $1.144 billion (870 million pounds) in its half-year earnings report earlier this month, saying the estimated recoverable value was $704 million, including tax receivables”. Mopani’s 2019 production totaled 51,275 tonnes of finished copper, which accounted for 13.9% of Glencore’s output from Africa and 3.7% of its overall copper production, which underscored the urgency of the management team to deal with this situation.
Confirmation of the “sale discussions” have now been made by both parties. “Glencore and Zambia’s minister for mining, Richard Musukwa, announced at a media briefing on Tuesday, August 26th 2020, that ZCCM-IH has submitted an expression of interest to acquire additional shares in Mopani Copper Mines. Glencore has given its approval to this move”.
The Minister of Mines further gave clarity regarding how the process of the transaction would proceed. “The government has constituted a team to liaise with ZCCM-IH for the negotiations with Glencore”, Honorable Musukwa said in a statement following the announcement. “Furthermore, ZCCM-IH is in the process of engaging a transaction advisor“.
There is no indication at the moment as to how much of the asset Glencore will be willing to let go following the recent announcement. “It has not yet been announced how many shares the Zambian company intends to acquire”. However, ZCCM IH who recently got primed by the CEO of IDC to take larger stakes in mining companies, have the blessing of the establishment to take on a role that they have been familiar with from years past.
–First paragraph updated