Mopani Privatisation (MCM Glencore FirstQuantum) - Zambian Copperbelt (sitios de interés)

90% Carlisa Investment Corporation BVI

10% ZCCM-IH

 

Carlisa Investment Corporation BVI

81.2% Glencore Finance (Bermuda) Ltd

18.8% Skyblue Enterprise Inc 

(subsidiary of First Quantum Minerals Ltd)

 

73.1% Glencore International AG

 

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BACKGROUND:
The Mufulira copper deposit was discovered in 1922 and started operations in February 1930 as Mufulira Copper Mines Limited. However, the first concentrate was only produced in July 1933 due to a slow down in mining activity resulting from the economic depression, and the copper Smelter was commissioned in 1937 followed by the electrolytic copper refinery in 1952. The Mufulira Mine, Concentrator, Smelter and Refinery constituted what became to be known as Mufulira Division of the Zambia Consolidated Copper Mines Limited (ZCCM). The division=s copper production comes from one large underground mine. The combined ore reserves and underground resources at Mufulira total over 100 million tonnes. With this type of resources, it is clear that with some capital investment, the mine has a long life ahead of it. The Mufulira Concentrator has been in operation since 1933 and over the past 22 years leading to its privatisation, the Concentrator has not received adequate replacement capital for major investments such as secondary and tertiary crushers, conveyance systems, ball mills and waste-handling infrastructure, resulting in poor plant performance.

The Mufulira Smelter has a capacity to treat 420,000 tonnes of concentrate per annum but has only been treating around 300,000 tonnes per annum due to shortage of concentrates. In addition, operational constraints had arisen from inadequate funding for replacement of major capital elements such as converters, electrostatic precipitators, electric furnace transformers, steel structures, front-end loaders and dump trucks. There was an urgent need to rehabilitate the precipitators in order to improve recoveries as well as reduce environmental dust pollution. Therefore, there was an urgent need to inject sufficient capital into the Mufulira Smelter in order to revitalise operations and improve efficiencies.

Mufulira Division was by 1996 a high cost and loss making division of ZCCM and facing a possible closure. The division was starved of cash for investment and was experiencing very high costs of social assets/town services.

 

SUCCESSFUL BIDDER:
- First Quantum Minerals Limited (FQM), an international mining company incorporated in Canada and listed on the Vancouver Stock Exchange; and
- Glencore International AG, an international metal processing and commodity trading company incorporated in Switzerland.
- ZCCM has retained a 10% interest of 5% free carry and the other 5% repayable from future dividends.

COMMERCIAL TERMS:
Cash Consideration at close US$ 20 m
Future Cash Payments and price participation US$ 23 m
- To be paid in five equal annual installments beginning 1 January 2003
- A further payment of up to US$ 4.4 million per annum price participation will be paid in the first 5 years Starting 1 January 2003.
ZCCM Retained interest 20% (5% free carried and 5% repayable From future dividends).

MAJOR PROVISIONS OF THE SALE AND PURCHASE AGREEMENT AND THE DEVELOPMENT AGREEMENT
a) Investment Commitment US$159 m
- For the first 3 years, US$84 million For Mufulira and US$75 million for Nkana
b) Conditional Investment US$343m
- US$103 million for Mufulira and
- US$240 million for the Nkana assets
c) Agreed Fiscal Regime
GRZ has agreed to provide MCM with certain fiscal concessions and stabilise the regime for a period of 15 years from close. This is in recognition of the substantial investment commitments offered and the requirement to provide an acceptable return for the investors.
The following Fiscal regime will apply to MCM:
- Company Income Tax will be levied at the rate of 25% as against the current rate of 35% for all companies and 30% for companies listed on the Lusaka Stock Exchange (Luse);
- Tax losses carry forward of 10 years;
- Mineral Royalty Tax of 1% reduced from 2% net buck value;
- No excise duty on electricity (Rural Electricity Levy), currently remitted at 10%;
- No withholding tax on payments of principal, interest and fees on moneys lent to the company and on distributions to shareholders.
- No customs and excise duties in respect of consumables imported for the purposes of the operations up to an amount of US$16 million, US$12 million, US$10 million, and US$10 million respectively for each year for the first 4 years from close of the transaction.
c) Environmental Liabilities
- Environmental liabilities in the mining industry could result into very large claims. All the mining investors have expressed concern on this matter, especially that they consider ZCCM to be bob-compliant with environmental laws.
- Historic environment liabilities have been assumed by GRZ. The company has also been indemnified from on-going environmental liabilities while in compliance with its environmental management plans.
d) Employment Issues

- MCM has takeover 10,850 employees at Mufulira Division and the Nkana Assets, together with their associated accrued terminal benefits. Those left out are being retrenched under the GRZ/World Bank retrenchment programme for ZCCM.
- The company will, within 12 months, prepare a Human Resources development Programme and is committed to providing social services of the required standards.
- The company has recognised the Mine Workers= Union of Zambia.
c) Local Business Development Programme
MCM will, within the first 12 months, prepare a Local Business Development Programme, for GRZ=s approval.

The Purchaser:
These assets have been sold to a consortium comprising:
- First Quantum Minerals Limited (FQM), an international mining company incorporated in Canada and listed on the Vancouver Stock Exchange; and
- Glencore International AG, an international metal processing and commodity trading company incorporated in Switzerland.
- ZCCM has retained a 10% interest of 5% free carry and the other 5% repayable from future dividends.

 

http://www.zpa.org.zm/trsum.pdf (page 58)

 

 

 

 

 

First Quantum Minerals Ltd (TSX:FM, LSE:FQM)

 

 

ZCCM-Investment Holdings