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Zambia’s Central Bank Shores up Gold Stocks by $15million in first Quarter

The central bank in Africa’s second largest copper producer has successfully shored its bullion reserves by K345.6 million (circa. $15 million) since yearend of 2020 to end of 1Q21. This initiative is supported by a gold purchase agreement signed with First Quantum Mining – Kansanshi Copper Mine and the state mining investment vehicle ZCCM-IH last year. Bank of Zambia opted to shore falling foreign exchange reserves buy stocking up with gold following recent discovery of the asset in key parts of Zambia. The red metal producers reserves have fallen to decade lows of $1.3billion weakening its import cover to less than 2.5 months leaving the Southern African nation vulnerable to external shocks.

In the period December 2020 to March 2021 the BOZ successfully shored its gold stock by 9,975 ounces (282.8 kgs) a cost of K345.6 million. Sixty nine percent of the purchases were from Kansanshi Copper Mining Plc at a cost of K241.8 million, while 30.7% (86.84 kgs) was from Zambia Gold company, a subsidiary of ZCCM – IH at a cost of K103.8 million.

Bank of Zambia Governor Mr. Christopher Mvunga looks on as First Quantum Mining Limited Director Operations Mr Rudi Badenhorst sign the Gold Purchase Agreement with the Central Bank in Lusaka 2020.

According to a press statement from the regulator, the Bank plans to purchase around 25,200-ounces of London Good Delivery gold from Kansanshi Copper Mining Plc and 21,000 ounces of dore gold with a minimum of 88% purity from Zambia Gold Company annually. These estimates are based on the gold purchase agreements signed with Kansanshi Copper Mining Plc and Zambia Gold Company in December, 2020. The central bank hinges viability and attractiveness of this the gold purchase venture in the local currency pricing which hedges against foreign exchange risk. The dore gold purchased from Zambia Gold Company will only reflect in international reserves after refining.

The purchase price of the commodity is not fixed and is determined by the London Bullion Market Association (LBMA). The LBMA, established in 1987, is the international trade association representing the global Over the Counter (OTC) bullion market, and defines itself as “the global authority on precious metals”.

Other interventions that the copper producer has in place to shore up reserves include dollarization of mining taxes paid directly to the central bank.

Source: https://thebusinesstelegraph.com/2021/04/22/zambias-central-bank-shores-gold-stocks-by-15million-in-first-quarter/
Annual Report Summaries, Investee Companies

Limestone Resources Limited (LRL) Extract from 2021 Annual Report

2021 was the first full calendar year of operations for Limestone Resources Limited (LRL), which only commenced operations on 1 September 2020 after transitioning from Ndola Lime Company Limited (NLC). NLC, remains under liquidation. 

As at December 2021, LRL was yet to be capitalised as ZCCM-IH was still running the process of engaging an equity partner with whom a long-term strategic plan for the Company would be developed. 

The lack of adequate capital posed a challenge and the Company underachieved across all performance metrics as production fell substantially below installed capacity due to reliability issues with the plant and equipment. Total sales revenue for the year was recorded at ZMW119.00 million (2020: ZMW34.76 million). The loss over the same period was ZMW39.78 million (2020: ZMW3.71 million). 

On 17 October 2021, LRL’s only functioning Kiln (VK1) experienced a collapse of its refractory bricks, leading to a halt in quicklime production. Since then, no production has been going on at LRL, pending financial resources for repair and maintenance works. 

ZCCM-IH has prioritized the selection and engagement process of an equity partner and is optimistic of completing the process within the first half of 2022 to ensure full recapitalisation of LRL that will substantially improve operational and financial performance. 

There were no dividends declared during the period under review (December 2020: Nil) 
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ZCCM-IH shareholders endorse 90% acquisition in Zambia’s Mopani

LUSAKA (Reuters) – Shareholders in Zambia’s ZCCM-IH have overwhelmingly supported its acquisition of a 90% stake in Mopani Copper Mines (MCM), the state-owned mining investment firm said on Wednesday.

Glencore agreed the sale of its majority stake in Mopani to ZCCM-IH in a $1.5 billion deal, the miner and trader said in January.

The extraordinary general meeting vote on the resolution was the last condition towards the completion of the transaction and ZCCM-IH now holds 100% ownership of Mopani, ZCCM-IH said in a statement.

The deal is funded by borrowings from Carlisa Investments Corp – a British Virgin Islands-based company through which Glencore holds its stake – and other members of the Glencore group.

With increased ownership, ZCCM-IH would now be an active participant in the global industry as copper becomes a critical metal, ZCCM-IH Chief Executive Mabvuto Chipata said.

“Mopani will repay the remaining debt of $1.5 billion from its own cashflows and the repayment is expected to happen well within the remaining life of mine,” Chipata said.

Glencore said in a separate statement it would continue to retain offtake rights in respect of Mopani’s production.

ZCCM-IH has said it expects to find a new investor for Mopani by the end of the year as it looks to boost copper output from a little more than 34,000 tonnes to 150,000 tonnes.

 

Source : https://www.reuters.com/article/uk-mopani-copper-m-a-zccm-ih/zccm-ih-shareholders-endorse-90-acquisition-in-zambias-mopani-idUSKBN2BN1UZ
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Glencore sold its stake in Mopani

Glencore today announces that its subsidiary Carlisa Investments, in which Glencore holds 81.2% of the shares, has completed the sale to ZCCM Investments Holdings of its 90% interest in Mopani Copper Mines, located in Zambia. As previously announced, the consideration of the transaction is US$1 and transaction debt of $1.5 billion.

Glencore said it will retain offtake rights in respect of Mopani’s copper production until the transaction debt has been repaid in full.

Mopani is an integrated copper producer located in the Copperbelt of central Zambia, producing copper cathodes.

Glencore is one of the world’s largest global diversified natural resource companies. The group’s operations comprise around 150 mining and metallurgical sites and oil production assets.

 

Source : https://www.kitco.com/news/2021-03-31/Glencore-sold-its-stake-in-Mopani.html
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GLENCORE CONFIRMS COMPLETION OF MOPANI STAKE SALE

Diversified miner Glencore has confirmed that its 81.2%-owned subsidiary Carlia Investments Corp has completed the the sale of its interest in Mopani Copper Mines to Zambian State-owned ZCCM Investment Holdings (ZCCM-IH).

Glencore retains offtake rights in respect of Mopani’s production.

ZCCM-IH notes in a separate statement that it is pleased that the conditions precedent to the transaction have been satisfied.

“ZCCM-IH is now the holder of 100% of the issued shares in Mopani, transforming the company from an investment company to owning and operating a multibillion-dollar mining asset in Zambia. The board looks forward to providing shareholders with further updates on Mopani in the coming months,” it states.

ZCCM-IH shareholders overwhelmingly (99.99%) nod the acquisition of 90% shares in mopani copper mines Plc from clarisa representing Glencore and FQM.

The Transaction was subjected to Shareholders’ approval during an Extraordinary General Meeting held yesterday virtually.

ZCCM-IH is now officially 100% owner of Mopani Copper Mines Plc, a move that is in line with the company’s new strategic plan 2020 – 2026.

Source : https://copperbeltkatangamining.com/glencore-confirms-completion-of-mopani-stake-sale/
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GVT. RESCUES MOPANI EMPLOYEES

Government has secured legal services for over 2,500 MOPANI Copper Mines employees who had sued Stanbic Bank for unilaterally increasing interest rates on their personal loans.

Mines Minister Richard Musukwa says government through ZCCM- IH has hired a legal Counsel to represent the aggrieved Mopani Copper Miners in order to assert their rights against Stanbic Bank.

Mr. Musukwa says government has received numerous complaints from the Mine workers whose initial case was dismissed by the Kitwe High Court after they failed to raise funds to pay the Lawyer.

He says government has secured legal services for the Mopani Miners in order to understand the problem and protect their interests.

Mr. Musukwa has told ZNBC News on telephone that government has a duty to ensure workers at Mopani Copper Mine are not short-changed in any transaction they venture.

And Mine Workers Union of Zambia President Joseph Chewe said the gesture by government is a relief to the miners who have been paying Stanbic Bank over the last seven years.

Mr. Chewe said Mopani workers will be assured of more money in their pockets once the loans are scrapped off their pay slips.

Mopani workers have been challenging Stanbic Bank for increasing their interest rates from 15 to 40 percent.

 

Source: https://www.znbc.co.zm/news/gvt-rescues-mopani-employees/
Annual Report Summaries, Investee Companies

Mopani Copper Mines Plc Extract from 2021 Annual Report

For the year ended 31 December 2021, Mopani Copper Mines (MCM) recorded cumulative net revenue of ZMW17. 263 billion (US$877.38 million) [(2020: ZMW13.54 billion (US$726.61 billion)]. The net profit for the year under review was ZMW76.82 billion (US$3.9 billion) [(2020: ZMW27.57 billion net loss (US$1.48 billion net loss)]. 

During the year under review, MCM produced a total of 87,618 tonnes of copper (2020: 90,050 tonnes). On 30 March 2021, the ZCCM-IH Shareholders approved the ZCCM-IH’s acquisition of the remaining 90% interest in Mopani held by Carlisa Investments Corp (“Carlisa”) for a US$1 consideration and US$1.50 billion in Transaction Debt. 

Post the acquisition, production has increased from a monthly average of 3,412 tonnes during the first three months under Glencore to a monthly average of 8,598 tonnes from April 2021 to December 2021 under ZCCM-IH. MCM continued to meet its target performance in both total production and revenue. Key priority for MCM will be the completion of the expansion projects which are estimated at US$300 million for the Synclinorium shaft (US$100 million), Mindola shaft (US$110 million), Henderson shaft (US$40 million), the new Nkana Concentrator (US$5 million), and the Tailings Storage Facility (US$ 45 million). Mopani, with the help of ZCCM-IH is actively seeking funding options for the completion of the expansion projects. 

The future of the mine relies heavily on completion of the expansion projects, which is expected to increase copper cathode production to 225,000 tonnes by 2025. The Company will also have the capacity to hoist close to 9 million tonnes of copper ore in the long term. 

There were no dividends declared during the period under review (December 2020: Nil). 
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Copper boom catching the eye of politicians

Copper producers awash with cash after a doubling of prices are entering the next phase of the cycle: increased fiscal pressure from their host nations, reports Bloomberg.

News this week from three of the top copper-producing nations show authorities are looking for a bigger share of the windfall. While that’s not unusual in periods of high prices, this time there’s the added incentive of finding ways to fund pandemic recovery, while talk of a new supercycle is also helping to ratchet up political rhetoric.

On Wednesday, Chile’s lower house approved a proposed royalty on copper in a move the industry says risks thwarting investment. On the same day, Bloomberg reported that the front-runner in Peru’s presidential race will push for a tougher stance against mining companies to ensure more of the revenue generated by vast mineral wealth stays in state coffers. Hours earlier, the head of Zambia’s state-owned mining investments company was quoted as saying he wants a bigger slice of the revenues from copper operations.

 

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“We could certainly see more examples of this in the coming months,” Colin Hamilton, managing director for commodities research at BMO Capital Markets, wrote in a note to clients.

While copper futures have retreated from the highest levels in almost a decade last month, they’re still almost 90% up from a year ago after Chinese factories bounced back quickly from the pandemic and producers endured disruptions. Now the prospect of a global recovery aided by vaccines and a wave of de-carbonizing pledges paint a rosy longer term picture for the metal used in everything from wiring and pipes to batteries and motors.

That hasn’t gone unnoticed by mining company stakeholders including unions and governments.

In Chile, where the pandemic was preceded by months of anti-government protests, consensus is building that highly profitable sectors such as mining should help finance the pandemic recovery and reduce economic inequalities.

In a country that accounts for more than a quarter of the world’s mined copper, opposition lawmakers want to introduce a 3% tax on copper and lithium produced by companies such as BHP Group and Albemarle Corp. to fund development projects, responding to the rising social and environmental standards of investors and supply chains.

“It’s part of what our country needs — greater economic and social justice and an end to privileges that big companies have had,” Christian Democrat Deputy Ivan Flores said.

In neighboring Peru, the second-biggest copper supplier, Yonhy Lescano said he wants to close tax loopholes and negotiate profit-sharing agreements with multinational companies. Lescano is leading in all major polls ahead of the highly competitive April 11 first round election. His comments will resonate with some isolated communities in the Peruvian highlands that have resisted mining.

In Zambia, ZCCM Investments Holdings Plc, which is finalizing the purchase of Glencore Plc’s Zambian copper unit, also wants larger shares in other companies that produce the metal in the southern African nation, Chief Executive Officer Mabvuto Chipata said in an interview.

Zambia has progressively increased royalties after long complaining that miners in the country seldom report profits and as a consequence pay little in tax. Now ZCCM-IH is seeking to further increase its share of revenues as Zambia prepares to hold general elections in August. Copperbelt Province, home to the mines of Glencore and other foreign companies, is a key political battleground.

To be sure, such initiatives may not see the light of day. As a presidential candidate, Peru’s Ollanta Humala rallied with local communities against foreign mining companies only to embrace the industry after he won office. In Chile, President Sebastian Pinera may veto the royalty bill or seek to block it through the country’s constitutional court.

 

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Companies, via their industry associations, will also fight against changes in the rules of the game. Management teams and boards that have endured previous cycles will be keen to defend margins at a time when operating and building mines is getting trickier and pricier.

But the industry will have to walk a fine line given the rising scrutiny on environment, social and governance issues.

With companies stepping up to highlight their ESG efforts, “host countries may find that the miners might not be as passive this time round,” Bloomberg Intelligence analyst Grant Sporre said in an emailed response.

Source : https://www.miningglobal.com/technology/newmont-operational-excellence-digital-transformation
Annual Report Summaries, Investee Companies

Lubambe Copper Mine Limited Extract from 2021 Annual Report

Lubambe Copper Mine Limited (Lubambe) reported total revenue of ZMW2.92 billion (US$148.60 million),[2020: ZMW2.15 billion (US$115.15 million)]. Over the same period, the Company recorded a loss of ZMW1.8 billion (US$91.38 million), [(2020: loss of ZMW1.58 billion (US$84.81 million)]. 

Lubambe’s road to recovery was a challenging one during the year as problems of poor ground conditions and high ore dilution persisted. Management was continually pursuing various remedial and corrective actions to address these challenges and has since engaged SRK consulting to undertake a review of the resource and devise favourable mining methods that will enhance recoveries from the ore body. 

During the year, Lubambe was carrying out additional work on the concept of the extension project by reviewing the initial work done and updating the mining method as well as reviewing the possibility of mining under the Lubengele tailings dam in preference to relocating and possibly processing the tailings. 

EMR capital, Lubambe’s majority shareholders begun a process to raise up to US$100 million in fresh capital during the year to improve liquidity and fund preliminary works on the extension project.