Zambia Seeks Control of Glencore’s Local Copper Mines

Zambia’s state-owned mining investment company is seeking to buy a controlling stake in Glencore Plc’s local copper unit to keep the operations running and protect jobs, Mines Minister Richard Musukwa said.

The government has set up a team to help ZCCM Investments Holdings negotiate with Glencore, and the Lusaka-based company is in the process of hiring a transaction adviser, the minister said in an emailed statement.

“ZCCM-IH, a shareholder in Mopani Copper Mines Plc, has submitted an expression of interest to acquire additional shares in Mopani,” he said. “Glencore has since responded favorably.”

Glencore has a troubled relationship with the authorities in Zambia, Africa’s second-biggest copper producer. That was highlighted earlier this year by a dispute over the company’s plans to close Mopani’s operations as copper prices fell after the coronavirus pandemic knocked the global economy.

Zambia’s government has been struggling with ballooning debt and an economy set to contract by 4.2% this year, and it’s not clear how it will finance a deal with Glencore.

ZCCM-IH owns 10% of Mopani, Glencore holds 73.1% and First Quantum Minerals Ltd. 16.9%. John Gladston, a First Quantum spokesman, declined to comment.

“Glencore can confirm that it is in discussions with existing Mopani shareholder ZCCM-IH and other shareholders regarding the potential acquisition of additional shares by ZCCM-IH from Glencore,” the Baar, Switzerland-based global commodities company said. “The discussions are progressing and further updates will be issued as appropriate.”

Revoke License

Glencore gave Mopani a carrying value of $1.67 billion, using a long-term copper price of $6,500 a ton -- slightly lower than Wednesday’s spot price -- in its 2019 annual report. It may not be in a hurry to sell the asset, though, according to Hunter Hillcoat, an analyst at Investec Securities Ltd. in London.

“Glencore is always a willing seller, at the right price. I don’t, however, believe that it is especially eager to get rid of Mopani,” he said in reply to emailed questions. “Glencore likes to maintain optionality, limiting commodity production (specially from higher cost assets) when prices are weak and maximizing it when prices are high. It has a demonstrated history of doing this and I believe that is what it is trying to do in this case.”

The Zambian government threatened to revoke Glencore’s mining license in April and temporarily blocked Mopani’s chief executive officer from leaving the country, before the mining giant agreed to postpone putting the operations under care and maintenance for 90 days.

The government also last year clashed with Vedanta Resources Plc, and moved to provisionally liquidate its operation in the country.

“Our talks with Glencore, the majority shareholders in Mopani, have revealed that the company believes that it is not sustainable to continue with operations,” Musukwa said. A controlling stake “allows a new approach to mining at Mopani and guarantees the welfare of the many Zambians employed at the mine,” he said.

©2020 Bloomberg L.P.

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