By Helen Reid

JOHANNESBURG – Glencore (OTC) a global mining and commodity trading firm, has helped finance Zambia’s Mopani Copper Mines. Since the company was unable to meet its obligations on time, the state still has not found a suitable investor over a period of one year.

Glencore sold Mopani in a deal with ZCCM, a state-owned mining investment company ZCCM, IH. Since then, Mopani has been able to pay some of its running expenses, such as power bills and concentrate purchases from third parties. Two sources who have direct knowledge of the matter said.

Sources claimed that Mopani is not producing enough income to pay current expenses. They also said that Mopani could not afford additional investments in mining and taking advantage of higher copper prices.

Sources requested anonymity because they were not authorized to address the media.

Glencore provided Mopani letters of credit on at least two occasions, when it didn’t have sufficient cash for copper concentrate. This effectively guaranteed Mopani’s purchase.

Charles Sakanya of Mopani Copper Mines stated that they had never received loans from Glencore. The claim Glencore was paying some Mopani’s expenses was speculation. His response to questions regarding the letters of credits was not forthcoming.

Sources did not provide details on how much Glencore received in funding.

Glencore didn’t answer Reuters’ questions regarding Mopani’s cost, but stated in a statement that it was continuing to partner ZCCM–IH for Mopani’s success through offtake agreements as well as related funding arrangements.

Hakainde Hichilema (Zambia’s president) was elected to office in August 2012. He had previously criticised Mopani while in opposition. Accordingly, the state could not assume more debt, when it was already in default two months prior and was currently in negotiations with the International Monetary Fund, IMF, for financial support.

Zambia continues to have a pressing need for investments.

The IMF reached a staff level agreement in December on an extended credit facility of $1.4 billion. However, the money can’t flow until Lusaka (and its creditors) agree to reduce the debt to sustainable levels.

Hichilema asked his government to locate a new investor in Mopani since his election. Officials state they are close to finding a new investor for Mopani.

‘MASSIVE MONSTER’

Sakanya of Mopani said that the mining company needed to negotiate new agreements with suppliers and copper concentrate purchase contract letters, credit cards, overdrafts, and other arrangements after changing in ownership. These negotiations and a March breakdown at the North shaft led to delayed payments.

A supplier claimed that Mopani payments had been slowing in recent weeks. According to the supplier who declined to be identified: “They have this huge beast to run and they don’t have enough money for it to run.”

Sakanya confirmed that we owe some money, but he was unable to give a precise figure as it is always changing. We are trying to find a solution.

Reuters couldn’t independently estimate how much Mopani owes to its suppliers.

According to a fourth source, government officials requested that Copperbelt Energy Corporation (the electricity supplier to the mine) relax its payment terms late last year. CEC declined. CEC stated that Mopani continues to pay its electricity bills on-time.

Paul Kabuswe (Zimbabwe’s mining minister) declined to answer a telephone call to confirm that Glencore provided financial support for Mopani. According to him, once we find a better partner all will be normal again.

The administration sees Mopani as an opportunity to find a new investor. It wants Zambia to be open for business. They have set a lofty goal to triple the country’s copper production in the next 10 years.

Kabuswe declared, “I want an investor to be found yesterday. That’s the timeline.” I’m very in hurry.

Mopani is over 80 years old and its original smelter was built in 1937. Sakanya stated that $300 million would be needed to finance an expansion to unlock the potential of producing 225,000 tonnes copper per year.

Mopani stated that it had produced 87.618 tonnes copper cathode by 2021, a decrease of 93.106 tonnes in 2020.

Sakanya stated that it is likely to produce 80.684 tonnes copper in the year ahead. This puts the drop of 8% to the one-month-long breakdown of the plant and the planned 45-day shut down of the smelter to maintain the plants.

Glencore made the decision to place Mopani under care and maintenance in April 2020. This angered the Zambian government, which wanted the mine to remain open. Later, in 2020, Glencore reduced the mine’s value by $1.041 million to $861 millions. Glencore stated that it has invested $4.4 billion into Mopani in the last 20 years.