The strange case of the sale of Mopani Copper Mines
So, let’s just recap.
Just over a hundred years ago copper was found in Northern Rhodesia by two experienced prospectors, Moir & Grey, who had noticed local inhabitants wearing turquoise-coloured bangles (malachite copper oxide ore, still mined in the region). Soon after, migrant workers gravitated north to develop the mines. By 1933, a coal fired smelter had been commissioned. Soon after, the Brits opened a golf club, followed by the boating, swimming, rugby and other clubs and messes – sufficient to make life pleasant.
The town now known as Mufulira (meaning ‘Land of Abundance’ in local Bemba) became wealthy. A hospital, called Ronald Ross General Hospital, named after the Scottish clinician who won the Nobel for identifying the cause of malaria via a study of the life cycle of the mosquito, was opened. Life was good and Mufulira became known as a party town. Ex-pats have told me they would think nothing of a drive up from Livingstone just for a night out.
Roan Selection Trust (RST) whose origins went back to geologist Chester Beatty (of Sunflowers fame) added to his wealth via this asset while Northern Rhodesia benefited from the Christianity delivered by Scottish missionaries.
By 1964 when Kenneth Kaunda (a head teacher from The Mine Basic School in Mufulira) liberated the country from its colonial yoke, prospects for the country appeared good. But his paternalist government wanted to appease his supporters and so nationalised the mines in 1970. Zambian Consolidated Copper Mines (ZCCM) was born. But a long slow decline followed as Kaunda milked the cow but did not keep it fed.
By 2000, under Zambia’s 2nd President, Chiluba, there was famine across the country. Copper prices declined to 65 cts per lb meaning the country was both famished and bust. The World Bank and IMF told Zambia there would be no more loans without privatisation. In came the investors - Glencore, First Quantum, Vedanta and others - each buying segments of the copper industry at knock-down prices.
By the time I visited Mufulira in 2008, Glencore, benefiting from tax breaks granted at purchase, had renamed the Mufulira complex, Mopani Copper Mines (MCM) after an indigenous Zambian tree, and invested in a new ISA smelter imported from their sister company at Mount ‘Isa’, while tolling copper concs imported from DRC and selling cathode to China. The town, still emerging from the state-controlled era, was crumbling but there was hope, and things began to get better.
In the last period from 2015 onwards, an ambitious attempt was made by Glencore to bring its complex up to date. A world class training school was established, in 2014 sulphur capture equipment was commissioned, and a new shaft direct to the face was built, reducing the distance for ore to reach the surface from a zig-zagged 14 km to a direct 1.8 km. The situation wasn’t perfect. Glencore still had more power in the country than the elected government. But they were building roads, spraying homes against malaria, maintaining clinics in the community, and creating activity.
Then came the disastrous accession of Patriotic Front’s Edgar Lungu after the death of Michael Sata in office. At a stroke, Zambia appeared to be heading in a Mugabe-like direction with rampant corruption. Glencore's presence ended when in April 2020 their appointed Mopani CEO, Nathan Bullock, was arrested on his way for a holiday with his family in Australia.
Glencore read the signs and left town, selling MCM to ZCCM-IH for $1.5 bln to be paid via copper revenues.
Why it was thought that ZCCM-IH might be better at running a complex mine and smelter in 2020 than Glencore - or than it had previously done in the 1970s - it is not possible to say. The reality was that despite the boom in EV and strong copper prices, MCM went into steep decline.
Then, suddenly, and unexpectedly, democracy returned to Zambia in 2021 when Hakainde Hichilema, an accountant, and someone versed in metals, came to power despite the fact he had been forbidden to campaign.
There was great hope across the country for a return to a better trajectory. A so-called anti-corruption technocrat - surely Hichilema would ensure copper mining could be put in the right hands and thus contribute to the exchequer and so benefit ordinary Zambians?
But when would a new competent buyer for Mopani be found? (A mining house with the experience and willingness to be both a good miner and equitable contributor of tax for public services?
So it was that in December 2023, at COP28, the much-awaited sale of MCM was announced. Observers such as me held our breath. It had been well rumoured that the South African miner Sibanye Stillwater, was high on the list. They had a good record, having taken over the extremely troubled Marikana mine in South Africa, and managed a difficult community situation to bring orderly mining back.
Instead, while President Hichilema was glad-handing officials at COP28 in UAE, it was announced that this jewel in the Zambian crown had been sold to an unknown entity. The entity about which we know little is called IRH – an entity with no record of experience in mining or smelting, nor any known knowledge of Zambia. The cost for 59%, as reported by Reuters on 22nd Dec 2023, was $620 mln in equity capital and a further $400 mln loan at undisclosed terms.
Not enough to pay the Glencore debt, who presumably still await their cheque...
I’ll leave the story here for the moment.
Why and how this copper asset will be in better hands with this United Arab Emirates acronym than with an experienced miner, we have yet to learn. I have written three times to the entity to ask about their plans - but so far without reply.
Anthony Lipmann
Published www.lord-copper.com March 2024