Glencore’s Mopani Copper to restart mining as Zambia opens door on “solutions to challenges”

Mufulira smelter, Mopani Copper Mines

MOPANI Copper Mines is to restart mining, and provide a 90-day notice period of its intention to place the operations on care and maintenance, the company said in a statement today.

During this notice period, it would discuss “potential solutions to its current challenges”  following “constructive discussions” with the Zambian government, the company said.

Mopani Copper, in which Glencore has a 75% stake, drew the anger of the Zambian government last month when it announced plans to mothball production, forecast earlier this year to be 50,000 to 70,000 tons of copper.

Glencore said that the onset of the COVID-19 virus, and subsequent decline in the copper price, had created one too many problems for Mopani to sustain.

The planned closure was criticised by the Zambian government. Mines minister, Richard Musukwa threatened to have Mopani Copper’s mining licence suspended, adding that the move was unjustifiable and illegal.

Talks as laid out in today’s announcement may include potential improvements that the Zambian government could make to its mining sector’s regulatory environment. Zambia has slapped import duties on certain goods that have negatively affected the country’s copper producers.

Some 11,000 employees would be affected by a possible closure, although Glencore said as per Mopani Copper’s original mothballing plan that employees would continue to be paid and receive staff benefits.

Said Mopani today: “The health and safety of the workforce and surrounding communities is our top priority. Mopani will engage with its employees, relevant contractors and local communities regarding the restart of operations”.

Glencore said in an update on April 30 that production from its African Copper assets would be about 280,000 tons for the year compared to previous guidance of 325,000 tons – a decline of about 14%. Production from the African Copper division totalled 370,000 tons in Glencore’s 2019 financial year.

Glencore last year mothballed its Mutanda assets in the Democratic Republic of Congo (DRC) which guaranteed lower production year-on-year from the division in 2020.

Total group copper production was expected to be 1.26 million tons (Mt) for the 2020 financial year down from previous guidance of 1.3Mt and production in 2019 of 1.37Mt. Cobalt production from the African assets would be about 5,300 tons compared to previous guidance of 9,900 tons.

“The Q1 production figures were fine, with production in key copper, coal and zinc divisions tracking at 26%, 27% and 26% vs our estimates, which include at least one month of shutdown across all operations,” said Barclays in a report.

Unit costs at the African Copper assets would be a shade higher than guided at 83 cents per pound (c/lb). However, excluding African Copper, unit cost copper production would be 105c/lb, compared to 220c/lb as per Glencore’s previous estimate.

Commenting in its production report, Glencore also said it would cut capital expenditure initially estimated at $5.5bn for the year by between $1bn to $1.5bn in order to weather the impact of COVID-19 which had also seen reductions in production across the group’s industrial assets.

This was a reflection of curtailed production levels at some assets as well as various deferrals – such as the delayed commissioning of an acid plant project at Katanga Mining -, lower equivalent US dollar costs due to generally weaker producer currencies, and lower input costs, particularly through oil price changes.

Glencore’s marketing activities, however, tend to benefit during periods of heightened volatility. The group said today the marketing business was on course to deliver within its $2.2bn to $3.2bn long-term earnings guidance range.

“There is no material change to our 2020 EBITDA forecasts following 1Q production report, with lower guided volumes fully offset by lower unit costs,” said UBS in a report on Glencore’s first production report.

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