MOPANI COPPER MINES OFFERED $200M CASH INJECTION
Glencore plc have proposed a joint $200 million loan to Mopani Copper Mines plc in order to alleviate present liquidity issues. According to a letter seen by Reuters, Glencore would put forward $100 million as a short-term cash injection with the other half being provided by Zambia Consolidated Copper Mines Investment Holdings (ZCCM-IH) – Zambia’s state-owned mining company.
The loan would be intended to cover general costs including buying reagents and paying workers and suppliers. Glencore is believed to have already lent $47 million through procuring letters of credit to cover electricity bills and the purchases of copper concentrate.
Zambia has been a mining powerhouse for over one-hundred years and mining remains crucial to its economy. Indeed, it is responsible for up to three-quarters of the country’s export earnings.
Copper production has been falling, and Mopani have struggled to pay suppliers on time. Consequently, ZCCM-IH recently hired Rothschilds & Co for a strategic review.
Glencore have a strong vested interest in the efficient and continued extraction of copper from the mining. Mopani Copper Mines was owned by Glencore until March 2021 until the Government of Zambia took it over in a deal worth $1.5 billion. However, this loan was debt financed. As such, Glencore retains offtake rights over copper production until this transaction debt is paid in full.
The original sale of the company was believed to be related to disagreements with the Zambian Government. In 2020 Glencore put the mine on care and maintenance status, owing to the pandemic and low copper prices, and the Zambian Government threatened to revoke its mining licences in response.
The mine is currently only operating at around one-third of its 225,00 tonne capacity. Significant investment, in the region of $300 million, is required to fund complex underground expansion works that would bring the mine closer to capacity operations.
ZCCM-IH declined to comment on the letter from Glencore to Rothschild, saying only: “Rothschild… are looking at a range of expressions of interests and letters of intent from various stakeholders aimed at ensuring the sustainability, growth and profitability of Mopani.”
Despite the difficulties brought about by the pandemic and its aftermath, demand for copper is expected to be strong long into the future. The growth of electric vehicles, charging stations, and other renewables are reliant on copper mining and as such the Government of Zambia sees the expansion of the mining industry as an opportunity for long-term future income.