* Glencore to retain Mopani output buying rights until debt
repaid
* Zambia to seek new investor to finance Mopani expansion
* Expects to repay loan in 10-17 years depending on copper
prices
(Adds comments on Zambia debt and Glencore strategy)
By Chris Mfula
LUSAKA, Jan 19 (Reuters) - Zambia's state mining investment
arm ZCCM-IH has agreed to buy Glencore's majority stake
in Mopani Copper Mines in a $1.5 billion deal funded by debt and
will seek a new investor, the government said on Tuesday.
The sale follows Glencore's attempt to suspend operations at
Mopani last year because of low copper prices and COVID-19
disruptions, prompting a government threat to revoke the
company's mining licences.
Zambia defaulted on a debt payment in November, becoming
Africa's first pandemic-era sovereign default, but will take on
more debt to finance the Mopani deal.
The takeover coincides with Zambia's preparations for
elections in August, with President Edgar Lungu courting voters
in the copper belt. More than 15,000 workers would have lost
their jobs if the mine was closed, Mines Minister Richard
Musukwa said at a ceremony in Lusaka to mark the deal.
Glencore said that ZCCM-IH will borrow the $1.5 billion from
Carlisa Investments Corp, a British Virgin Islands-based company
through which Glencore holds its stake, and other unspecified
members of the Glencore group.
Under the deal, ZCCM-IH will acquire the remaining 90% of
Mopani from Carlisa, giving it full control of the company for
an indicative $1.
Glencore will retain buying rights for Mopani's copper
output until the transaction debt has been repaid. ZCCM-IH will
repay the loan principal by giving Glencore creditors 3% of
Mopani's gross revenue from 2021-2023 and 10-17.5% of Mopani's
gross revenue from then on.
ZCCM-IH will also owe quarterly interest of LIBOR plus 3%.
Asked how Zambia can afford to take on more debt, a mines
ministry official said: "It's not sitting on the ministry of
finance. The company is able to pay on its own."
Musukwa said ZCCM-IH will repay the loan in 10-17 years
depending on copper prices, which are currently near
their highest in eight years at about $8,000 a tonne.
SUSTAINABLE DEBT?
However, the Glencore transaction could compromise Zambia's
drive for debt sustainability required as part of any support
from the International Monetary Fund (IMF).
"If another $1.5 billion is added to existing debts, it will
only make the solvency targets in the (expected) IMF programme
more difficult to hit in 2-3 years' time, potentially increasing
the need for haircuts on other debts," said an emerging markets
debt specialist who has followed Zambia's default.
Mines Minister Musukwa said the country will try to attract
a new investor in Mopani, adding that companies from Britain,
Canada, China, South Africa, Turkey and Qatar have expressed
interest. ZCCM-IH needs about $300 million to complete expansion
projects started by Glencore, he added.
Mopani produced 34,479 tonnes of copper last year, up 14.6%
from 2019, and the expansion projects will boost output beyond
150,000 tonnes a year, Musukwa said without specifying a
timeline.
Analysts said the deal is a positive for Glencore, which
will secure its exit from Zambia while maintaining control of
Mopani's copper.
"Zambia is not the easiest place to do business at the
moment and that has probably stymied a lot of investor
interest," said Liberum mining analyst Ben Davis.
"At these commodity prices, all assets are good assets, but
it hasn't been that great for Glencore over the past few years."
Glencore said it holds 73% of Mopani through an 81.2% stake
in Carlisa. First Quantum Minerals, which previously
held 16.9% of Mopani, did not immediately respond to a request
for comment.
(Reporting by Chris Mfula in Lusaka
Additional reporting by Zandi Shabalala in London and Joe Bavier
in Johannesburg
Writing by Helen Reid in Johannesburg
Editing by Susan Fenton and David Goodman)
Glencore (GLEN)