Yesterday, we as Zambian Business Times – ZBT carried an article which gave the information on the buy back of Mopani Copper Mines by ZCCM-IH, the erstwhile owners before the privatization.
The full details of the transaction are yet to be fully availed, with some high level details being availed by each party to the transaction. ZCCM-IH chairman Eric Silwamba stated that a more detailed note will be issued to meet listing disclosure requirements under the Lusaka Securities Exchange – LSE in the next few days.
The beauty of this transaction this time around is that all the parties to the deal from ZCCM-IH, Glencore and FQM are all listed on different security exchanges which all have at least some higher levels of disclosure requirements. This is perhaps the biggest benefit and the reason why we as ZBT continue to advocate for listing of more state owned enterprise – SOE’s.
We have seen and we expect that each party to this transaction is carefully managing their stakeholders and releasing information strategically to assures its key stakeholders that they have done a good deal. But as the saying goes, the devil is in the details.
Below is the statement issued by Glencore dated 19 January 2021 availed to ZBT. We reproduce it verbatim below:
Glencore today announces that its subsidiary Carlisa Investments Corp. (“Carlisa”), in which Glencore holds 81.2% of the shares, has signed an agreement with ZCCM Investments Holding plc (“ZCCM”) to transfer its 90% interest in Mopani Copper Mines plc (“Mopani”) to ZCCM, the owner of the remaining 10% interest in Mopani, for US$1 and the Transaction Debt (as defined below).
Completion of the sale is conditional on receipt of certain regulatory approvals in Zambia and on the approval of the shareholders and board of directors of ZCCM, and is expected to occur within the next three months.
Mopani has been funded by borrowings from Carlisa and other members of the Glencore group. On completion, US$1.5 billion of debt (the “Transaction Debt”) will remain owed by Mopani to Glencore group creditors on the following terms:
a. interest under the Transaction Debt will be capitalised for the first three years after completion, and thereafter will be payable quarterly at LIBOR + 3% (subject to a switch to an equivalent interest rate based on SOFR); and
b. principal outstanding under the Transaction Debt will be repayable under a dual mechanism whereby:
i. 3% of gross revenue of the Mopani group from 2021-2023 (inclusive), and 10-17.5% of gross revenue of the Mopani group thereafter; and
ii. 33.3% of EBITDA less tax, changes in working capital, capital expenditure, royalty payments and interest and principal (calculated under the first mechanism) payments in respect of Transaction Debt, is at the end of each quarter required to be paid. Repayment of principal (together with accrued interest) may additionally be required in the event of an occurrence of certain other early prepayment events, including certain change of control events in respect of Mopani.
After completion of the sale, Glencore will retain offtake rights in respect of Mopani’s copper production until the Transaction Debt has been repaid in full.
As ZCCM is the holder of 10% of the voting rights in Mopani, a subsidiary undertaking of Glencore plc, the transaction falls within the criteria set out in Listing Rule 11.1.10R. Accordingly, Glencore has obtained written confirmation from a sponsor that the terms of the transaction are fair and reasonable as far as Glencore shareholders are concerned.
To get a rounded view of the transaction, you also need to look at what FQM has posted, what out for from ZBT. We are of the view that after reviewing the transaction and information shared by all the three parties, it is from there that we can then make a more informed inquiry…
