Glencore offers loans to secure production from Zambia’s Mopani copper mine -letter

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JOHANNESBURG, Sept 23 (Reuters) – Glencore Plc (GLEN.L) and Zambian state-owned mining company ZCCM-IH could jointly lend $200 million to Mopani Copper Mines to help cover operating costs under a proposed made by the global miner last week, a letter seen by Reuters showed.

Glencore, which owned Mopani until March 2021, is ready to lend up to $100 million as a short-term cash injection to Zambia’s Mopani copper mine, the global miner said in a ” non-binding letter of intent” of September 12.

Mopani Copper Mines is a large mining and smelter complex that Glencore sold to state mining investment company ZCCM-IH in 2021 after it drew the ire of the Zambian government by putting it under care and maintenance in 2020 at a time of falling copper prices.

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Swiss company Glencore, however, retained the exclusive right to sell Mopani output when it sold its majority stake in the asset to ZCCM-IH in a $1.5 billion debt-financed deal. .

The more than 90-year-old mine has the potential to produce 225,000 tonnes of copper a year, almost three times its planned output for 2022, Mopani Copper Mines officials said, but it needs an investment of at least $300 million to fund a complicated underground expansion. .

As copper production plummets and Mopani struggles to pay suppliers on time, ZCCM-IH in June engaged investment bank Rothschild & Co for a strategic review to find a new investor for the mine.

While Mopani awaits further investment, its production has plummeted, making running costs increasingly difficult to cover.

In the letter to Rothschild, Glencore said Mopani needed $200 million in “short-term liquidity”, and offered to split that equally with ZCCM-IH. The money would help Mopani cover overhead costs, including purchasing reagents and paying workers and contractors, according to a source familiar with the letter.

Neither Glencore nor Rothschild commented on the content of the letter, possible negotiations between the parties or the progress of the strategic review.

ZCCM-IH declined to comment on the letter, saying only, “Rothschild…is considering a series of expressions of interest and letters of intent from various stakeholders aimed at ensuring the sustainability, growth and profitability of Mopani.” .

The Zambian mines ministry did not respond to questions about the letter.

In the letter, Glencore said it had already loaned Mopani $47 million by securing letters of credit to cover copper concentrate purchases and electricity bills. Under the proposal, Glencore would provide up to an additional $53 million through letters of credit.

The proposal did not specify the interest rate for the loan.

Reuters reported in May that Glencore was helping pay some of the company’s running costs, including electricity bills. Read more

It is in Glencore’s interest that Mopani continue to produce as ZCCM repays its $1.5 billion debt to Glencore through Mopani’s copper.

Glencore would require $120 million worth of copper concentrates, anodes and cathodes to be at the Mopani smelter or transported to the border as collateral for its $100 million loan, according to the letter.

As future demand for copper is expected to be strong due to the growth of electric vehicles, charging stations and other renewable energy infrastructure as the world seeks to decarbonise, Zambia is considering mine expansion as an opportunity to generate much-needed revenue.

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Reporting by Helen Reid and Clara Denina; edited by Ernest Scheyder and Susan Fenton

Our standards: The Thomson Reuters Trust Principles.

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