Anglo-Swiss multinational mining and commodity trading giant Glencore says it has helped to fund Zambia’s Mopani Copper Mines as the company has been incapable of paying its bills on time and the state is yet to find a new investor more than a year after it took over the complex.
Sources familiar with the matter who pleaded anonymity say Glencore, which sold Mopani to state mining investment firm ZCCM-Investment Holdings has since helped cover some of Mopani’s running costs, including power bills and copper concentrate purchases from third parties.
One of the sources disclosed that Mopani was not making enough revenue to meet current expenses, adding that the company could not afford the investments needed to mine more and take advantage of high copper prices.
Another source added that Glencore has provided credit letters to Mopani on two or three occasions when the company was short on cash to buy copper concentrate, effectively guaranteeing Mopani’s purchase.
However, Mopani Copper Mines Chief Executive Officer, Charles Sakanya said the company had not received any loans from Glencore and that claim Glencore was covering some of Mopani’s costs was speculation.
Glencore is the sole off taker of copper from the mine, under the deal that saw ZCCM-Investment Holdings take control of Mopani on March 31 last year for $1.5 billion in debt.
However, the sources did not say how much funding Glencore had provided.
In a statement, Glencore said it is continuing to work alongside ZCCM-IH to ensure the success of Mopani through the off take agreements and related funding arrangements.
ZCCM-IH declined a request for comment.
Incumbent Zambia’s President Hakainde Hichilema, who was elected in August last year, faulted the Mopani deal while in opposition, saying the state should not amass more debt when it had defaulted two months earlier and was seeking financial support from the International Monetary Fund.
Zambia’s need for investment remains pressing as it became the first country to default in the COVID-19 pandemic era, struggling under a debt burden worth 120% of GDP. The country’s external debt exceeded $17 billion at the end of 2021, of which over $5 billion was owed to China.
The Southern African country reached a staff-level agreement with the IMF on a $1.4 billion extended credit facility in December last year, but the money cannot flow the country and its creditors agree on debt reduction to sustainable levels.
Mopani’s CEO Sakanya said the mining company had to renegotiate agreements with suppliers, copper concentrate purchase contracts, letters of credit and overdrafts after the change in ownership and the negotiations, along with a breakdown in March that resulted in late payments.
A supplier who pleaded anonymity said the frequent rate of payments from Mopani slowed over recent weeks.
“They’ve got this massive monster to run, and they don’t have enough money to run it,” the supplier said, pleading anonymity.
Sakanya affirmed to the supplier’s claim adding that he could not ascertain the debt figure.
A fourth source said government officials asked Copperbelt Energy Corporation, the electricity supplier to the mine, late last year to relax its payment terms, but the company refused. CEC said Mopani has continued to pay its power bills on time.
Finding a new investor in Mopani is seen as a litmus test for the Hilchilema’s administration, which wants to show that Zambia is open for business and has set an ambitious goal of more than tripling the country’s annual copper production within the next decade.
Mopani, which is close to a century old, with the first mine shaft sunk in 1929 and the original smelter built in 1937, needs about $300 million to fund an expansion that would unlock the potential to produce around 225 000 tonnes of copper annually.
Mopani said it produced 87 618 tonnes of copper cathode in 2021, down from 93 106 tonnes in 2020.
It is expected to produce 80 684 tonnes of copper this year, putting the near 8% expected drop down to the month-long breakdown and a planned 45-day shutdown of the smelter for maintenance in July.
Glencore decided in April 2020 to put Mopani on care and maintenance, drawing the ire of the Zambian government which wanted it to stay open and later in 2020 wrote down the value of the mine by $1.041 billion to $861 million.