Shareholders of Zambian Consolidated Copper Mines (ZCCM) have unanimously approved the sale of their company’s Mufulira division and the Nkana mine, concentrator and cobalt plant to Mopani Copper Mines, a joint venture between
First Quantum and Glencore International have been helping ZCCM operate these assets for the past month.
The Mufulira and Nkana mines produced 86,000 tonnes copper and 1,250 tonnes cobalt during the fiscal year ended March 31, 1999.
Nkana hosts a resource of 323 million tonnes grading 2.21% copper and 0.1% cobalt, including a reserve of 76 million tonnes grading 2.26% copper and 0.14% cobalt. The resource at Mufulira consists of 71 million tonnes grading 3.1% copper, including a reserve of 29 million tonnes with a copper grade of 3.02%.
Zambia’s copper mines have been in steady decline since the early 1970s, when they were nationalized by then-president Kenneth Kaunda. Since then, annual copper output has shrunk to 250,000 from 700,000 tonnes.
The current government has sold the Konkola, Nchanga and Nampundwe mines to South Africa-based Anglo American. These mines account for about 70% of Zambia’s copper production. First Quantum and Glencore will effectively hold the balance.
At closing, ZCCM is to receive US$20 million and US$115 million in equal annual payments between 2003 and 2007. Glencore will finance the acquisition by lending First Quantum US$9.8 million at no interest. In exchange, Glencore is to receive 1.5 million purchase warrants exercisable at $3.75 per share.
The new venture will spend US$159 million over the next three years and make conditional investments of US$343 million. ZCCM retains a 5% free and 5% repayable carried interest. Glencore will also supply a US$25-million working capital facility, as well as a US$15-million standby facility.
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