Zambia May Sell Majority Stake in Mine Bought From Glencore

LUSAKA (Capital Markets in Africa) — Zambia is sounding out new investors to buy a majority stake in Mopani Copper Mines Plc after last week agreeing to take over the operations from Glencore Plc.

That deal will see the government control Mopani, an asset that has been unprofitable for years but still owe $1.5 billion of debt to Glencore. Selling a majority stake would help state-owned ZCCM Investments Holdings Plcraise about $300 million to further develop the mine and pay off some of the debt while finding an experienced partner to run the operations, said Barnaby Mulenga, permanent secretary in the Ministry of Mines.

ZCCM hasn’t started talks over a stake sale but has received interest from investors in Canada, the U.S., U.K., China, Turkey and South Africa, Mulenga said. He didn’t disclose names or say when a deal may be reached.

Glencore, the world’s biggest commodity trader, will retain offtake rights for Mopani’s copper output until the debt has been paid. Mopani once was central to Glencore’s plans to turn around its African copper business, but it opted to pull out after clashing with the government on the future of the mine, a key employer for Zambia.

Retaining a “significant minority means that ZCCM could even own 45% or 49%,” Mulenga said in an interview from Lusaka. “It depends on what the strategic partner is willing to do, what’s being offered in terms of the level of investment and commitment.”

Mopani needs about $300 million to complete projects started by Glencore, and some of the debt owed to the company could be paid immediately if there’s a successful stake sale, Mulenga said. Zambia’s move to take on debt to keep the operations running could harm its chances of getting a loan from the International Monetary Fund after it became the first African nation to default on borrowings since the coronavirus pandemic began.

“The Glencore debt can be paid off if an investor buys a stake,” Mulenga said. “That presumes we can invest in the mine while cleaning up the issue of the debt.”

While Mopani has been losing money, it still may have a promising future, said William Tankard, principal copper analyst at Wood Mackenzie Ltd.

“I would expect interest to be limited to parties for which acquisition rationale involves both generating profit but, crucially, also establishing long-term raw material supplies,” Tankard said. “A buyer funded by Chinese capital, for example.”