JOHANNESBURG/LONDON — Glencore will likely sell its entire 73.1% stake in Zambia’s Mopani Copper Mines to the government’s mining investment arm ZCCM-IH rather than becoming a minority stakeholder, two sources with direct knowledge told Reuters.
Zambia and Swiss-based Glencore are at “cross purposes” over Mopani, Zambian Mines Minister Richard Musukwa had said on Tuesday when he announced ZCCM-IH aims to increase its shareholding in Mopani to 51% “or even more”, from 10% currently.
Glencore’s plans to put Mopani on care and maintenance prompted the Zambian government to threaten in April to revoke the firm’s mining licences.
Two sources with direct knowledge of the negotiations said Glencore is looking to exit the asset entirely.
“As of now, we are discussing a potential sale of their stake in Mopani,” said one of the sources.
A Glencore spokesman declined to comment. First Quantum, which owns 16.9% of Mopani, did not respond to a request for comment.
The move by ZCCM-IH to take control of Mopani is part of its strategy shift away from minority stakes and towards running mines as an operator.
Glencore wrote off the value of Mopani by $1.144 billion in its half-year earnings report earlier this month, saying the estimated recoverable value was $704 million, including tax receivables.
Mopani’s total liabilities exceeded its total assets by $2.562 billion in 2019, the company reported in a financial statement, indicating “a material uncertainty in relation to the going concern assumption”.
Mopani produced 51,275 tonnes of finished copper in 2019 including purchased materials – accounting for 13.9% of Glencore’s African copper output and 3.7% of its overall copper output.
Glencore, which reported a first-half loss due to the impact of the pandemic, will not reap the benefits of billions spent on expansion projects over the last three years if it sells to ZCCM-IH but investors see this as a way for the miner to cut its losses.
“Mopani has been a big headache for Glencore, the mine has never delivered anything for shareholders,” a Glencore shareholder, who asked not to be identified, said, citing numerous accidents and operational issues.
CASH CONSTRAINTS
A major hurdle to clinching the deal is Zambia’s lack of funds to pay for the stake and fund the mine’s running costs, sources say.
Glencore’s stake in Mopani is worth $514.6 million, according to its own valuation. Mopani’s 2019 financial statement shows operating expenses of $931 million.
Zambia’s total foreign exchange reserves stood at $1.43 billion at the end of June, equivalent to just 2.3 months of import cover, according to the central bank.
ZCCM-IH’s cash and term deposits together amounted to 828.9 million Zambian kwacha ($43 million) by March 31 2019, according to the latest financial statements on its website.
A ZCCM-IH spokeswoman did not reply to Reuters’ questions about how it would finance the stake purchase.
Waiting for FRIDAY CHANDA TO BLAME HH for This..Every action has a positive side of it. lets look at the positive of this guys
Kkkkkkkk PF naikosa, they have no other options but to hire Nawakwi who has knowledge of managing privatized mines.
There is only one man who knows how to sale the mines. He will sale the Mine for a quarter of what it is worth. Let him sale and he will get himself as shareholder and Director on Mopani. He will also sale himself Nkana Stadium and shinde stadium. Clever chap he is.
Let him sale the entire ZCCM -IH to himself and change the name to ZCCM-HH
ISN’T THIS WHAT YOU WANTED BA ZAMBIA?
Everything has crumbled and Zambia is already a broke country through reckless borrowing. And Mopani drops the bombshell, you can’t even put a stake in there, you are dead broke
“We were told by advisers, who included the International Monetary Fund and the World Bank that for the next 20 years, Zambian copper would not make a profit. [But, if we privatised] we would be able to access debt relief, and this was a huge carrot in front of us, We had no option,” said then Minister of Finance Edith Nawakwi.#1999
Nawakwi is to blame for the Privatization mess! She was in charge, even of Consulting Firms she hired. Worse, her Callington Maize scandal where she cost the treasury over $10Million which has never been recovered. She would fit well as ECL’S running mate Jagaban of corruption … Kikikiki
Buying loss making mine so you can perform black magic to make a profit. Blacks never learn.
Which ever way you go you are f.ucked
I don’t like PF for destroying the country but I think its time we took control of our own resources, for a long time we have been ripped of by these investors who do nothing for the local communities where they operate.
Zambians, be careful!
These are loss making mines (liabilities to Glencore)….WHY BUY THEM?
Draconian measures will be needed to make them profitable, I doubt if Zambian workers will endure such measures:
** 33% salary cut
** Labour reorganisation with 15-20% reduction
** Reduction in consumables (diesel, exlosives, power, mill balls, chemical reagents, etc) by 15%
** Cherry picking (mining the high-grade stopes), until copper price improves
** Moisture reduction in concentrates to reduce transport cost to Mufulira smelter
** Possibility of lag reprocessing
Let the government buy that equity and then resale it to more serious investors. Don’t handle these stubborn investors with kid gloves.
@ Chikubabe, I totally agree with you 100%. Little wonder the tenure was only 11 months, total flop. 2day someone wants to appear patriotic by alleging falsities …!! Shameful
WELL IT IS INTERESTING,THE POOR ARE GOING TO SUFFER MORE BECAUSE OF WRONG CHOICES.LET BOWMAN LUSAMBO AND TASILA LUNGU BUY OFF THE MINE WITH THE HELP OF CHITALU CHILUFYA ,KAIZOR ZULU,BA MWINE AND JEAN KAPATA .THE HAVE BILLIONS OF DOLLARS .
The hour has come !!!! Ask china for a bailout. Sell your wifes to them…
Antonio mwanza ANA Zambian citizen
Where are you and your…….
” the west want to take over our minerals through UPND “……….?????
Comon , now you have a chance to show the western imperialists that Zambia is none negotiable…….
Hehehehehehe …
Investors place investments in regions where investments are safe and secure for the foreseeable future. Sudden policy shifts automatically raise suspicions regarding the motivation of government. Raising government shares is not necessarily a bad move but there is need to take precautions in order to avoid capital flight. Negotiations need to be clean and above board without haste and without political drama. The mixed economy is doing well but it is a delicate balance that can easily tilt against government when investors become scared of political interference. Mining policies need full consultation between stakeholders. The investor is a major stakeholder and deserves government support. To exploit resources, the government needs investors, not beggars. Take time to increase…
Antonio mwanza ANA Zambian citizen
Where are you and your…….
” the west want to take over our minerals through UPND “……….?????
Comon , now you have a chance to show the western imperialists that Zambia is none negotiable…….
Hehehehehehe …
This is one transaction that exposes our fake experts. There are several instruments available that can be used to redeem Glencore’s stake in Mopani. If you’re familiar with the Mulungushi Reforms you’d understand where UNIP and KK went wrong. GRZ doesn’t need hard cash to pay for those Shares, they only need a good manager and the mine will pay for itself. This is a crucial time where patriotism must be employed at 101% otherwise if you choose another EHT (Economic Hit Man) like the Great Mwene Mutapa it’s Zambia that’ll lose and individuals will smile all the way to the bank.
50 years ago the UNIP government began the nationalisation of major industries and the mines and created INDECO and ZIMCO. Kaunda became the de facto Chief Executive through his surrogate appointees. The mines were producing 750,000 tons of copper per year. Zambia had no money to pay the mine owners so it negotiated a payment over 10 years. A couple of years or so later, we entered the One Party state and government now did not care. 25 years later, copper production slumped to 250,000 tons. We reversed the nationalisation and in 2020, production is back to 750,000. History is about to repeat. INDECO is back under PF. ZIMCO will be ZCCM-IH. If Lungu gets a big majority in 2021 parliament, be rest assured a One Party State with the help of China is on the cards. Zambians, the choice is…
Why cant I post comments. All my fans are calling me asking where I am
Why cant I post comments. All my fans are calling me asking where I am. I think I will give up on this website. Why should we stress. We have others like mwebantu and Zambia reports
THIS I A DISASTROUS PATH THE COUNTRY IS TAKING.
LET US NOT GO BACK TO UNIP DAYS
PUT THE COUNTRY FIRST AND THE GENERAL POPULATION
WE NEED PROFESSIONAL INVESTORS TO GO FORWARD
ZCCM-IH SHOULD REMAIN A MINORITY IN MOPANI ????
I get surprised at the way some people think. I listened to Edith Nawakwi as she responded to an interview on what happened as they Privatized the mines. She clearly states and spells it out, how they did it without giving it much thought, because they were under pressure. It is clear, it is her and her government. I wonder how some brains operate in this country. Is it fearing Edith? She is there, why is she not put to task? For the first time, I came to my senses as to why she hates HH so much. If she had powers, she would have him disappear from this earth, just because she knew, he would one day tell it all like he did, she had always feared this moment would come. I wished she could remain calm, than accuse HH of this, and that. She has more to explain, the maize saga is another. So…
esterday, FDD leader Edith Nawakwi charged that the conduct of Hakainde Hichilema during the privatization exercise bordered on theft of public resources and that he is lucky he has never been arrested so far.
LIES