ZAMBIA is expected to deposit its first instalment of the US $1.5 billion debt acquired following the attainment of majority shares in Mopani Copper Mines in April, 2021, Ministry of Mines Permanent secretary Barnaby Mulenga has revealed.
And Mulenga says the vastness of the US $18 billion worth of copper at the mining firm makes the US $1.5 billion loan to Glencoe Plc “child’s play.”
In an interview, Thursday, Mulenga said the change of ownership transaction will be completed in March and that by then.
“In terms of the loan, right now even before the equity partner, the asset in its current form, even without finishing those assets, the asset is able to pay for the first instalment. So, what will happen is the fact that as production because this is, let me remind you by the way; are you aware that there is already an off-taker agreement between Mopani and Glencore? So, Mopani had a running contract with Glencore from 2009, not today. They had an off-take agreement to get all the production of Mopani and then would then pay Mopani the money. What I am trying to say is the fact that that relationship will continue albeit we will have to change. If they are paid off, there is no need for the agreement to continue,” Mulenga said.
“If someone else comes with the money, they will be paid off. The reason why I am saying this is because the transaction has to be completed by March 31, 2021. So, when it is completed, in other words, there are still some processes to be done. There are regulatory approvals that had to be done because these are mandatory to complete a transaction. Once you have completed that, then in this particular case, it means that now you have completely moved out. Then at that stage we must make our first instalments. Whatever we produce in the month of April, for example, in this case if you produce 10 tonnes, they will get the entire 10 tonnes, but one tonne will be used towards repaying the loan. Whatever you are producing today, whatever you are producing tomorrow, you pay. So, it’s in our best interest as a country that the moment we complete those projects that were started, we ramp up production so that the loan can be paid faster. But there is an extra option of saying, ‘bring in a strategic partner,’ in that way, the debt will not be completely there, but you would have maintained operations.”
And Mulenga said the vastness of the US $18 billion worth of copper at the mining firm made the US $1.5 billion loan amount to Glencore “child’s play.”
“We commend ZCCM-IH because what they did will safeguard the lives of the people that would have been on the streets today because some people now are talking about the US $1.5 billion, they are saying, it’s like ‘we have been taken advantage of.’ It’s been a going concern for 20 years, there are rules here, we have laws that govern how loans are governed. Because the shareholder wants to leave, do you ignore the loans and say, ‘just ignore it?’ Now, like I said, we have a case where actual infrastructure sitting in Mufulira is valued at US $1.2 billion. Actual, not theory, so you expect someone to just go without getting part of their money back? You want to just grab it and say, ‘you go and do whatever you want?’ They will sue. The option has those weaknesses,” he said.
“That’s why we took option three because we have a win-win situation. Now, the US $18 billion worth of copper that is sitting at Mopani makes the US $1.5 loan child’s play! Further, in this particular case, this loan based on the prices of today means that the loan will be repaid. In other words, we don’t even need any strategic partners; we don’t need anything else; this loan will be repaid in 11 years. The second part to this now is that, when you own an asset the way ZCCM-IH has, you can finance a business either by equity or by debt. This means we will now have money to hit the Bank of Zambia, even if it’s two days, that money helps in stabilising the kwacha and helping our economy. What I am trying to say is that the criticising of this deal needs to be looked at in the right context.”
Mulenga added that according to the off-take agreement, 20 per cent of the copper cathodes would be supplied to local manufacturers making Zambia benefit even more from the deal.
“There is a provision indicated to say that the local domestic producers who buy copper from Mopani, companies like ZAMEFA, companies like Neo Cut, these companies produce tables and they do value addition. So, the issue, then, was the value addition companies in Zambia should not be going to Geneva (Switzerland) to go and buy copper produced and processed in Zambia. They should be able to have the cathodes so that ZAMEFA should do the value addition because value addition is in line with government’s policy of industrialisation and it’s positive,” said Mulenga.
“So, the agreement we agreed that 20 per cent of the cathodes would be reserved for that purpose with room for increase. So, in this case, when the 20 per cent remains, the 80 per cent goes to Glencore, gets 10 per cent, which is 10 per cent of the 100, meaning out of 80, they get 10 and the 70 per cent, which is remaining they will pay money to Mopani for operations. So, that is part of the background of why we are where we are. So, some of the critics, I have been following the debate. And the debate is healthy, we are in a democracy and it’s good to hear the different views. I want someone to tell me out of the three options that we were left with, which option was the best? Where you close the mine send everyone home, close those schools that were run by the mine and close those hospitals? At that point, anyone will ask, so why is the government there? If it can’t look into the interest of the people?”