Zambia takes on $1.5 billion debt to acquire Glencore’s Mopani mine

ZCCM-IH has agreed to take over Glencore’s majority stake in Mopani Copper Mines in a $1.5 billion deal funded by debt, and will look for a new investor, Mines Minister Richard Musukwa has announced.

The sale comes after Glencore last year tried to suspend operations at Mopani due to low copper prices and COVID-19 disruptions, angering the government, which threatened to revoke the company’s mining licenses.

At a ceremony in Lusaka, Mr. Musukwa said the country will try to attract a new investor in Mopani, adding that “several entities” from Britain, Canada, China, Turkey, and Qatar have expressed interest.

Mr. Musukwa said ZCCM-IH needs about $300 million to complete expansion projects started by Glencore.

Mr Musukwa said Mopani’s current production of “over 34,000 tonnes” of copper has increased over the last year adding that the expansion projects will boost output beyond 150,000 tonnes a year.

Mr Musukwa said more than 15,000 workers would have lost their jobs if the mine was closed.

ZCCM-IH Chairman Eric Silwamba said the company would acquire 90% of Mopani from Carlisa Investments Corp, bringing ZCCM-IH full control of the company. ZCCM-IH previously held 10% of Mopani.

Glencore said today that it will receive $1 for the 90% holding it owns with Vancouver-based First Quantum Minerals Ltd.

There has been speculation on how Zambia would pay for the asset after it became the first African country to default on its debt since the onset of the coronavirus pandemic.

After the sale of its 73% stake for an indicative $1 is complete, Glencore will retain offtake rights of Mopani’s copper production until the transaction debt has been repaid in full, the company said.

Glencore said it holds 81.2% of the shares in Carlisa.

First Quantum Minerals, which previously held 16.9% of Mopani, did not immediately respond to a request for comment.

Glencore has been in talks with the state about Mopani since last year after the two clashed on the future of the mine, which has been unprofitable for years.

Zambia’s state-owned ZCCM Investments Holdings Plc already owned 10% of Mopani.

Once the deal is complete, Mopani will owe its previous owners $1.5 billion.

That will be repaid from sales and profits going forward.

*Below is the full press statement*

Glencore today announces that its subsidiary Carlisa Investments Corp. (“Carlisa”), in which Glencore holds 81.2% of the shares, has signed an agreement with ZCCM Investments Holding plc (“ZCCM”) to transfer its 90% interest in Mopani Copper Mines plc (“Mopani”) to ZCCM, the owner of the remaining 10% interest in Mopani, for US$1 and the Transaction Debt (as defined below).

Completion of the sale is conditional on receipt of certain regulatory approvals in Zambia and on the approval of the shareholders and board of directors of ZCCM, and is expected to occur within the next three months.

Mopani has been funded by borrowings from Carlisa and other members of the Glencore group. On completion, US$1.5 billion of debt (the “Transaction Debt”) will remain owed by Mopani to Glencore group creditors on the following terms:

a. interest under the Transaction Debt will be capitalised for the first three years after completion, and thereafter will be payable quarterly at LIBOR + 3% (subject to a switch to an equivalent interest rate based on SOFR); and

b. principal outstanding under the Transaction Debt will be repayable under a dual mechanism whereby:

i. 3% of gross revenue of the Mopani group from 2021-2023 (inclusive), and 10-17.5% of gross revenue of the Mopani group thereafter; and

ii. 33.3% of EBITDA less tax, changes in working capital, capital expenditure, royalty payments and interest and principal (calculated under the first mechanism) payments in respect of Transaction Debt, is at the end of each quarter required to be paid.

Repayment of principal (together with accrued interest) may additionally be required in the event of an occurrence of certain other early prepayment events, including certain change of control events in respect of Mopani.

After completion of the sale, Glencore will retain offtake rights in respect of Mopani’s copper production until the Transaction Debt has been repaid in full.

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