By FELIX NKINKE –
“WE will put in place measures to facilitate local ownership and increased participation of Zambians in the mining sector.”
This was a promise by President Hakainde Hichilema in his inauguration speech over two and half years ago.
The President also emphasized that mining would be one of the key priority sectors that would drive economic growth and reduce poverty.
That promise by Mr Hichilema is now part of written history, but his words still live. And just last week the president showed that his government was walking the talk as the promise made over two years ago became a reality.
On Friday, the Zambia Consolidated Copper Mines Investment Holdings (ZCCM IH), a key player in the running of Mopani Copper Mine (MCM), disclosed the long-awaited transaction details for Mopani’s strategic equity partner in which Zambia has secured a 49 per cent stake.
According to ZCCM IH Company Secretary Charles Mjumphi, the International Resources Holding (IRH) of Abu Dhabi will invest about US$1.1 billion in Mopani, gaining access to a metal that’s crucial to the energy transition revolution as fears grow over future supplies.
Last month, Zambia picked IRH, a component of Abu Dhabi’s most valuable listed company, the International Holdings Company, as the strategic equity partner in Mopani, which was sought-after by several investors looking for copper assets.
The Mopani deal is viewed by many as key to helping Zambia revive major copper and cobalt mines that Glencore Plc previously owned and play a significant role in contributing to the country’s ambitious copper production target.
According to the details of the transaction deal, Mr Mjumphi explained that IRH will pay about US$620 million for a 51 per cent stake in the mine, with the Zambian government owning 49 per cent.
The aim is to strengthen MCM’s financial position, support capital projects, and enhance operational efficiency.
IRH has also agreed to make up to US$400 million in shareholder loans to settle existing debts.
Additionally, IRH has committed up to US$220 million in interim funding, marking a substantial effort to strengthen Zambia’s mining sector.
An additional US$80 million shareholder loan could also be advanced, if required, based on the future working capital requirements of the business.
Mr Mjumphi said that IRH’s investment would be used to fund Mopani’s production expansion plan, provide working capital and pay off part of the US$1.5 billion debt owed to previous owner Glencore, ZCCM-IH said in a statement.
He also said as part of the overall restructuring of MCM’s balance sheet, agreement has been reached between IRH, ZCCM-IH and Glencore to restructure US$1.5 billion Glencore transaction debt that resulted when ZCCM-IH acquired 100 per cent of MCM in 2021, as well as up to US$100 million of the letter of credit support provided to Mopani by Glencore since ZCCM-IH’s acquisition.
However, the final terms of this restructuring agreement are still being finalised and further detail will be provided once definitive agreements are signed.
A new Board of Directors, reflective of the revised shareholding structure, will be constituted.
IRH will also bring its technical team of over 120 professionals working with major global mining companies and possessing a variety of experience, including in geology, engineering, metallurgy, and project management.
It is envisaged that the IRH team will provide support and expertise to the existing Mopani management team to ensure a successful turnaround of the mine’s operations.
IRH will also leverage the expertise of its various subsidiaries and joint venture companies as required, to support the development of ancillary opportunities across the entire mining value chain.
IRH’s investment into MCM embraces a strict focus on multiple ESG principles.
According to the transaction agreement, in collaboration with the Zambian government, IRH will not undertake staff redundancies at Mopani Any staff separations to occur will be strictly performance-related and carried out purely in the ordinary course of business.
IRH has also committed to work with ZCCM-IH to optimise the local supply chains to benefit the Zambian people and will ensure that, inter alia, Mopani continues to be managed by the existing local management team.
MCM’s existing Corporate Social Responsibility programs, including its investments in schools, hospitals and sports clubs will also continue to receive funding and other support from the new owners.
IRH’s strategy aims to invest in critical minerals in the region, across the entire mining value chain and contribute to the country’s mining industry.
ZCCM-IH took full control of MCM from Glencore in 2021, with a plan to find a suitable strategic equity partner to contribute to the expansion of the mine and provide the necessary capital for growth.
With that done, it’s now believed that it is an important strategic step towards the revitalisation of the Zambian economy, the Zambian mining industry, and the continued development of the Copperbelt by enabling the long-term sustainability of the Mopani mine.
Also, it is hoped that IRH’s investment into Mopani will recapitalise its balance sheet, secure direct and indirect jobs, and provide both funding and technical experience to complete MCM’s Project Development Plan, all of which underpin Mopani’s strategy to achieve its target of becoming a 200,000 tonne per annum producer of copper cathodes in the next three years.
Beyond this, ZCCM-IH and IRH will work with Mopani and the Zambian Government to pursue other opportunities in the Zambian mining industry that will attract further investment into the region.
Mr Mjumphi disclosed that the transaction will close and become effective once all of the conditions precedent listed have been completed.
He added that closing may occur during the first quarter of next year.
According to ZCCM IH Mopani needs about US$300 million to complete projects started by Glencore and boost annual production fivefold, to 200,000 tonnes.
It added that the mine made a loss of US$196 million in the first half of 2023.
Currently, Mopani operates two sites on the Copperbelt, including shafts, a smelter and a refinery.
On Friday last week, President Hichilema also revealed that the debt portion of the Mopani deal has been lowered.
“We have now been able to negotiate this liability down from US$1.5 billion to US$400 million. We have closed the Mopani deal,” the President declared.
He also emphasized that Zambia was not going to be observers in the mining sector, but will be taking substance now.
It’s without doubt that the Mopani deal was a pivotal development that aligns with President Hichilema’s vision to increase Zambian participation in the mining industry.
The head of State’s concrete actions towards achieving his vision include bringing the Mopani and Konkola Copper Mines to full operation.