Zambia is considering reversing the purchase of 90% stake in Mopani by ZCCM-IH

The Zambian government is considering reversing the Glencore – Mopani deal. The Zambian Mines Minister Hon. Paul Kabuswe said in a statement, that the deal’s contract does not seem to favor Zambian interests at all. This is made worst by the fact that this deal was made at a time close to Glencore’s recently revealed corruption scandals.

Last year ZCCM-IH got overwhelming support from its sharholders for its acquisition of a 90% stake in Mopani Copper Mines (MCM). Glencore agreed to sale its majority stake in Mopani to ZCCM-IH in a $1.5 billion deal, the miner and trader said in January 2021.

ZCCM-IH reported in a statement that 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 Copper Mines. The deal was funded by borrowings from Carlisa Investments Corp – a British Virgin Islands-based company through which Glencore held the 90% stake in Mopani.

Last month the minority shareholders of ZCCM-IH called for investigations into the purchase of the 90% shares of Mopani Copper Mines (MCM) by ZCCM – Investments Holding from Carlisa Investment exorbitantly valued at $1.5 billion last year.

The minority shareholders of ZCCM-IH wrote to the Chairperson of the Anti-Corruption Commission Board Musa Mwenye and Director General Gilbert Phiri over their proposed investigations into the transaction.

The group further wrote to Attorney General Mulilo Kabesha asking his office to review the detailed sale agreement.

Spokesperson of minority shareholders of ZCCM-IH Thierry Charles said buying Mopani at $1.5 billion in 2021 was too exorbitant.

“The Mopani $1.5 billion deal must be investigated in the light of the above-mentioned elements which we question, we ask Chairperson of the Anti Corruption Commission Board Musa Mwenye, Director General Gilbert Phiri and Attorney General Mulilo Kabesha to launch investigations regarding the conditions under which the contract for the purchase of shares in MCM was negotiated and drafted: to look for any undisclosed adverse clauses that explain the inconsistencies in the figures and to question all those who negotiated the exorbitant $1.5 billion deal,” Charles wrote.

“Contrary to the false claims of former Vice-President Inonge Wina, the acquisition of the 90% stake in MCM was not the best deal of the year but rather appears to be the worst ZCCM-IH deal of all time. We are well aware that other ongoing ACC investigations to track down the looters of the clique are very busy. However, the sums involved in Mopani are colossal, not only for the purchase but also for the financial consequences of the deficits, and therefore deserve a strong mobilisation of ACC and AG services to investigate this deal which seems to us to be leonine,” Mr. Charles stated.

He continued:”The Mopani $1.5 billion deal must be investigated In a letter dated 6 June 2022 to Chairperson of the Anti-Corruption Commission Board Musa Mwenye and Director General Gilbert Phiri, our shareholder group wished to express our questions and concerns regarding the purchase of the 90% shares of Mopani Copper Mines (MCM) by ZCCM – Investments Holding from Carlisa Investment Corporation. In a letter dated 8 June 2022 we also asked Attorney General Mulilo Kabesha to review the detailed sale agreement. 1. Background On 31 March 2021, ZCCM-IH acquired 90% of the shares in Mopani Copper Mines (MCM) from Carlisa Investment Corporation, owned by Glencore and First Quantum Minerals, following approval by ZCCM-IH shareholders at an Extraordinary General Meeting. The amount negotiated was $1.5 billion to be repaid annually over a period of 10 to 17 years.”

Mr. Charles expressed the misgivings of minority shareholders of ZCCM-IH in the deal.

“An appalling sale price Carlisa intended to put MCM into care and maintenance, so the $1.5 billion price for a company that had been making losses for many, many years was totally unjustified. The minority shareholders were in favour of ZCCM-IH finally becoming a full-fledged mining operator, and the takeover of Mopani seemed a good opportunity given the figures and information presented in the Circular to Shareholders issued on 9 March 2021. Opaque sales contract The detailed sale agreement was not disclosed to the minority Shareholders of ZCCM-IH, but we were given information in the Circular to shareholders. MCM’s copper production would be sold to Glencore at LME prices. Catastrophic and inconsistent figures .Visibly biased data and arguments put forward in the Circular to shareholders it was stated: Assuming current copper prices are maintained, it is forecast that the company will generate sufficient cash inflows to finance capital expenditure internally,” he said.

“The average expected Copper price average was US$ 7,000 yet, when copper prices are around US$ 9.500, the Management of ZCCM-IH indicated that the company is currently not generating free cash flows owing to the fact that the company requires capital investments in order to increase productivity during the Virtual Shareholder Open day on 27 April 2022. There have even been Press reports about MCM’s inability to pay suppliers on time, while the largest repayments to Carlisa have not even begun. Inconsistency of figures while copper production is in line with or above expectations and copper prices are very high, EBITDA is completely at odds with the figures presented in the Circular. The problem is not technical, copper production is indeed satisfactory.”

“The problem is elsewhere and the detailed contract seems to be the cause. Questionable verification of the sale contract by former Attorney General Likando Kalaluka Like any contract involving a parastatal company, the contract for the sale of the 90% stake in MCM had to be supervised by the Attorney General for compliance and to ensure that the interests of the Zambian people were safeguarded. However, former Attorney General Likando Kalaluka validated an illegal deal between Milingo Lungu and ZCCM-IH for the suspicious bonding of a loan to KCM just before the 2021 presidential elections. Likando Kalaluka’s competence and seriousness therefore raise questions about the quality of the audit and the legality of the contract signed with Carlisa in early 2021.”