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The Zambian government raised the ante in its dispute with Glencore by arresting the head of its local subsidiary as it tried to leave the South African country on Wednesday night.
Glencore said Nathan Bullock, executive director of Mopani Copper Mines, had been held at Lusaka airport in connection with his decision to close the business for three months.
“Nathan was subsequently released,” Glencore said in a statement, adding that Bullock had returned home to spend time with his family in Australia when he was detained.
Bullock’s arrest came hours after Zambia threatened to strip Glencore of its license to operate in the country and dramatically sharpens the increasingly bitter dispute over Mopani.
Last week Glencore announced the closure of the Mopani loss for three months due to low commodity prices and the coronavirus pandemic.
That move prompted a furious response from Zambia’s mining minister Richard Musukwa, who called it unjustified and illegal. Zambia has a large debt burden on servicing and earns most of its foreign exchange from copper exports.
In a letter dated April 14 to Mr. Bullock, the Zambia Mining Licensing Committee said it planned to revoke the company’s operating permits for the Nkana and Mufulira mines in seven days, unless it could show why not. They should be canceled.
Glencore owns 73.1 percent of Mopani. The other shareholders are First Quantum Minerals with a 16.9 percent stake and the government-controlled Zambia Consolidated Copper Mines Investment Holdings with 10 percent.
“The Mining Licensing Committee has received an investigative report from the Director of Mines which has established that you have proceeded to place the Nkana and Mufulira mines in care and maintenance without giving sufficient notice as required by law,” the letter said , seen by the Financial Times.
Glencore said it was committed to engaging in constructive dialogue with the Zambian authorities. The Swiss-based company has invested more than $ 4 billion in the country since 2000.
Zambia’s threat to revoke Glencore’s mining license comes as President Edgar Lungu’s government struggles to pay off its debt.
Former ministers and officials urged the country on Wednesday to seek an IMF loan. The country has $ 11 billion of external debt.
Mr. Lungu has previously taken a hard line against international mining companies. Last year, the government placed Konkola Copper Mines in liquidation, accusing its owner, Vedanta Resources, of violating the terms of its mining license.
Vedanta has denied the charges and has taken his case to international arbitration, a route Glencore may also be forced to take if the dispute escalates.
“This is an ill-conceived move at a critical time for Zambia,” said Peter Leon, a partner at the Herbert Smith Freehills law firm.
Nick Branson, senior analyst for Africa at Verisk Maplecroft, said Zambia’s ultimatum to Glencore was the latest in a long list of “populist threats” from a heavily indebted government that fears lower copper profits at a time when it was fighting to avoid sovereign default.
“We see a margin of compromise given the state’s weak hand and the miner’s deep pockets,” he said. “Zambia risks another broken discharge if it moves to expropriate Mopani, as it still has to secure a new buyer for Vedanta’s Konkola copper mines 11 months after the interim liquidator took over.”
He added that he hoped the Zambian government “will push Glencore’s fiscal advances, rather than seek expropriation and end a second unprofitable mine on its books.”
Mopani is one of Glencore’s “focus” assets and a key element in a broader plan to transform the performance of its African copper unit, which also includes mines in the Democratic Republic of the Congo. It employs 11,000 people, including contractors.
The group is about to complete a multi-million dollar investment plan aimed at increasing Mopani’s production to 140,000 tons a year and putting the business on a more sustainable basis.
Mopani has struggled for years in a difficult operational and regulatory context in Zambia.
Its two mines were expected to produce between 50,000 and 70,000 tons this year, worth between $ 255m and $ 357m at current copper prices. It is among an increasing number of copper assets that have been closed due to the Covid-19 pandemic.
Glencore has promised to pay its permanent Zambian employees, excluding management, while Mopani is closed.
