Copper mines sold

The government-owned Zambia Consolidated Copper Mines (ZCCM) and the mining giant Anglo American have signed an agreement transferring ownership of 70 percent of ZCCM's mines to the South African conglomerate. According to the agreement signed on Friday, Anglo's subsidiary, Zambia Copper Investments (ZCI) has acquired the mines through its new company, the Konkola Copper Mines plc (KCM) in which ZCI holds a 65 percent stake and ZCCM 20 percent. A 7.5 percent interest each is held by the World Bank's International Finance Corporation (IFC) and the Commonwealth Development Corporation's Financial Servives. The transferred mines are the Konkola division. They include the Konkola Deep Mining project, the Nchanga division with its Chingola refractory ore stockpiles, the Nampundwe pyrite mine, as well as the infrastructure associated with the mines. ZCCM, in addition to its 20 percent stake in KCM, will receive an immediate cash consideration of US $30 million from KCM for the transferred assets. It will also receive a deferred cash consideration of US $60 million in six equal instalments starting from January 2006 and the benefits of copper and cobalt price participation schemes. Anglo said the US $30 million cash consideration payable by KCM to ZCCM will be funded by the capital contributions of KCM's shareholders, excluding ZCCM, while the deferred cash consideration of US $60 million. Other payments under the schemes are expected to be funded from cash generated by KCM's operations. KCM, according to Anglo, will commit a minimum of US $208 million to capital expenditure during the next three years, subject to the viability of the acquired operations, and its forecast capital expenditure for this three-year period is expected to be US $260 million. It said the Konkola Deep Mining project has an estimated project cost of US $523 million. In two other related transactions, ZCI has sold its 27.3 percent stake in ZCCM to the Zambian government for a cash consideration of US $30 million on a deferred payment basis payable in six equal instalments to commence in January 2006, Anglo said. At the same time, Mopani Copper Mines (MCM), a joint venture between Swiss-based Glencore International AG and Canada's First Quantum Minerals have bought ZCCM's Mufulira division and the Nkana mines. MCM will make an initial investment of US $156 million in the two mines and will be spread over the first three years, while another US $343 million has been budgeted for contingencies. Under the terms of the purchase, MCM will have 90 percent equity in the mines, while the Zambian government, through ZCCM, will hold 10 percent. The sale of the ZCCM mines brings to conclusion years of negotiations on the privatisation of the mines which was characterised by suspended negotiations and disagreements over the terms of the sale between ZCCM and Anglo American. Anglo was initially planning to buy the mines together with the Chilean copper conglomerate Codelco. However, the Chilean parastatal withdrew late last year, saying the mines did not fit into its longer term plans.