Anglo American (AAUK-Q) has agreed to pony up to another US$107.3 million before walking away from the Konkola copper project in Zambia.
The mining giant said on Monday that it had come to an agreement with the Zambian government, ZCCM Investments Holdings, the International Finance Corp., CDC Group and Zambia Copper Investments (ZCI) Ltd. regarding its withdrawal from the troubled project.
Under the plan, Anglo will contribute US$30 million to keep Konkola Copper Mines’ mining and smelting operations running. The company will also provide KCM a loan of up to US$26.5 million on favourable terms.
Anglo will also eat US$50.8 million worth of two equal-sized loans held by CDC Group, a U.K.-based venture capitalist, and International Finance Corp., the World Bank’s lending arm.
The company will also chip in another US$34 million to cover in full its liabilities relating to KCM.
Last March, the company took a US$350 million writedown on its 2001 income statement; the agreement boost that figure to US$384 million.
When all is said and done, Anglo will relinquish the bulk its 65% stake in the project (via a 50.9% stake in ZCI) to the Copperbelt Development Foundation, an independent organization designed to help diversify the country’s economy and soften the blow of the mine’s eventual closure. The remaining 9.5% stake in ZCI will go to an employee incentive scheme.
In the end, KCM will be owned 58% by ZCI and 42% by ZCCM. KCM will own and operate the Konkola mine, the Nchanga underground and open pit mines, the Nampundwe pyrite mine and the Nkana smelter and refinery. The deal will also see KCM and ZCI become substantially debt-free.
Anglo will continue to provide certain services until the end of March to help ensure a smooth management transition.
The mines are one of Zambia’s main sources of income accounting for about 67% of Zambia’s metals output and employing thousands.
Anglo bought the bulk of Zambia’s struggling mines in March 2000 and vowed to turn them around. The plan failed in the face of a sharp decline in global copper prices and by January 2002 the mining giant announced it wanted to part with the assets.
Anglo’s exit plan still requires regulatory approval.
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