Commodities trader Glencore set to sell its stake in Mopani Copper to ZCCM-IH

ZAMBIA – Glencore, a commodities trader, is set to sell its entire stake (73.1%) in Mopani Copper Mines (MCM) to the Zambian Government’s mining investment unit ZCCM-IH.

Mopani Copper Mines (MCM) is currently 73.1% owned by Glencore, 16.9% by First Quantum Minerals and the remaining 10% by ZCCM-IH. The latest news comes as the commodities major doesn’t want to just become a minority stakeholder of MCM.

On 25 August, Zambian Mines Minister Richard Musukwa had said that the Government and Glencore are at ‘cross purposes’ over MCM and announced that the country’s mining investment arm intends to increase its shareholding in MCM to 51% or ‘even more’.

In April, Zambia intended to revoke the mining licences of MCM as the firm did not give sufficient notice before suspending its mining operations due to the Covid-19 crisis.

ZCCM-IH’s move to take control of Mopani is part of its strategy to transition towards operating mines from holding minority stakes.

According to Reuters, Glencore wrote off the value of MCM by US$1.144bn in its H1-2020 earnings report earlier this month, saying that the ‘estimated recoverable value’ was US$704m.

Last month, Musukwa rejected MCM’s proposal to suspend operations due to low copper prices as a result of the interrupted transportation and supply chains caused by the Covid-19 outbreak.

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.

Glencore gave Mopani a carrying value of US$1.67 billion, using a long-term copper price of US$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.

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.

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