(Bloomberg) -- Glencore Plc has agreed to sell its stake in Mopani Copper Mines Plc to the Zambian government for $1.5 billion, but will get just $1 upfront.
Glencore has been in talks with the state about Mopani since last year after the two clashed on the future of the mine, which has been unprofitable for years. Despite the challenges, the operations are a vital employer for Zambia.
Glencore said Tuesday it will receive $1 for the 90% holding it owns with Vancouver-based First Quantum Minerals Ltd. There has been speculation on how Zambia would pay for the asset after it became the first African country to default on its debt since the onset of the coronavirus pandemic. Zambia’s state-owned ZCCM Investments Holdings Plc already owned 10% of Mopani.
Once the deal is complete, Mopani will owe its previous owners $1.5 billion. That will be repaid from sales and profits going forward. Glencore, the world’s biggest commodity trader, will retain offtake rights for Mopani’s copper production until the debt has been paid.
Mopani was once central to Glencore’s plans to turn around its African copper business that’s been dogged by problems in recent years. The company spent billions of dollars to sink new shafts, but the asset has struggled to turn a profit. Still, once fully up and running, the mines should produce about 140,000 tons of copper a year, compared with just 51,000 tons in 2019.
Glencore shelved its plans to place the operations under care and maintenance last year after Zambia threatened to revoke its mining license in April. The government’s strategy is driven by a need to safeguard jobs at the site.
Zambia went into arrears in November, after failing to convince bondholders to freeze debt-service payments. Taking on the debt to keep Mopani’s operations running in the key Copperbelt Province before general elections in August could further harm the government’s chances of getting a loan from the International Monetary Fund.
Still, the country will look for partners to help shoulder that burden.
Mines Minister Richard Musukwa said the government has received interest from companies based in Canada, Turkey, Qatar, China and South Africa. Mopani will require about $300 million of investment to complete projects that Glencore had started, he said.
(Updates with Zambian government comment in last paragraph)