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Zambia expects to conclude talks on the purchase of Glencore’s stake in Mopani Copper Mines within a month, according to Barnaby Mulenga, permanent secretary of the Mines Ministry.
Mulenga declined to reveal the size of the stake that state-owned ZCCM Investments Holdings is trying to acquire. ZCCM-IH currently owns 10% of Mopani, with Glencore 73.1% and Vancouver-based First Quantum Minerals 16.9%.
Zambia wants to increase its stake after clashing with Glencore earlier this year over the company’s plan to stop Mopani’s operations. But it is not clear how the liquidity-strained government, which last week defaulted on its Eurobond interest payments, would finance a deal. While $ 1.14 billion impairments at Mopani contributed to Glencore posting a loss in the first half, the Swiss-based commodity giant still placed a $ 704 million value on operations.
Mulenga expects Mines Minister Richard Musukwa to announce a deal in the coming weeks, who said in September that both companies were prepared to sell their entire stake in Mopani. Zambia will have no problem raising funds for the deal, according to Mulenga, although there will be no money from the Treasury.
“The resource attracts money, so the issue of financing is the least of the Zambian government’s concerns,” Mulenga said in an interview Thursday, referring to Mopani’s copper mining operations. He did not elaborate.
A Glencore spokesperson declined to comment. First Quantum spokesman John Gladston also declined to comment.
Mining disputes
Glencore shelved its plans to put operations under care and maintenance for 90 days after Zambia threatened to revoke its mining license in April. The government’s strategy is driven by the need to safeguard jobs at Mopani, rather than a desire to increase its equity stake, Mulenga said.
Zambia’s increasingly strained relations with investors in the key copper mining industry may in part reflect President Edgar Lungu’s maneuvering ahead of next year’s elections. The government is also in arbitration over mining assets it seized last year from Vedanta Resources from billionaire Anil Agarwal.
Other copper miners have stopped $ 2 billion in planned investments due to a dispute over a royalty tax. A mining conference later this year will seek to address that issue, Mulenga said.
Zambia, Africa’s second largest copper producer, relies on the metal for about 70% of its export earnings. The impact of the coronavirus pandemic is forecast to reduce production this year to around 764,188 tonnes, well below the national target of 1 million tonnes, according to the Zambian Chamber of Mines.
“Hopefully we can reach a consensus on what this tax regime should look like,” Mulenga said.
