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CHINESE CREDITORS LOSING PATIENCE…as under pressure Lungu running out of options

WESTERN mining companies’ dominance in the Copperbelt is fading, owing partly to changing political conditions and business strategies, according to Africa Confidential.

Volume 60 No. 18 of the Africa Confidential (AC) published on Friday indicates that facing corruption probes and resource nationalism, Western mining companies are quitting the Copperbelt Province.

It says producing 70 per cent of the world’s cobalt, an essential component of electric car batteries and mobile phones, the Copperbelt is in the midst of a sweeping transformation.

“Seeking to expand their access to the metal, China’s mining companies are eyeing the potential sale of assets such as Vedanta’s Konkola Copper Mines (KCM) in Zambia and Glencore’s mothballed Mutanda mine in Congo-Kinshasa,” AC says.

“Buying up those assets and consolidating political ties with Lusaka and Kinshasa would enable China’s companies to extend their control of supply chains in the high-tech sector and reshape the region’s mining sector at the same time. It also fits with a shift in China’s strategy in Africa to focus more on private companies’ operations, rather than state-backed mega projects….”

Another complication, according AC, is the growing scrutiny of international oil and mining companies.

It notes that Glencore, one of the biggest commodity trading and production companies, faces a raft of corruption investigations.

“Western mining companies’ dominance in the Copperbelt is fading, owing partly to changing political conditions and business strategies while economic war between the United States and China escalates,” it says, adding that the US and China have not competed much for African oil or minerals.

“But President Donald Trump’s trade war, coupled with the search for scarce minerals for high-tech products, has changed the stakes.”

The AC also highlights debts contracted by President Edgar Lungu’s government.

It says Zambia has long had Chinese mining companies, small and medium scale operators, on the Copperbelt.

“President Edgar Lungu’s government has racked up much bigger debts to Chinese companies than it has previously admitted,” AC writes.

“Sources in the finance ministry in Lusaka say that the Chinese creditors are losing patience over debt arrears. Chinese companies are not keen on debt rescheduling and would prefer to get some collateral, perhaps in the form of other mining assets. Under growing political pressure as economic problems mount, President Lungu is running out of options.”

The AC further points out that Chinese companies will seek to benefit from the liquidation of KCM and: “are also watching First Quantum Minerals (FQM), the country’s largest producer, which operates Kansanshi and Sentinel mines.”

“The government-owned ZCCM Investment Holdings, which has a 20 per cent stake in the country’s biggest mines, wants to liquidate KCM, claiming that Vedanta is lying about expansion plans and is paying too little tax,” AC notes.

“However, Chinese companies are reluctant to buy disputed assets. ZCCM-IH’s claims have to go through arbitration. This is an important test and could open the way for a sale. The companies also face some anti-Chinese sentiment on the ground among trade unionists and local communities.”

Meanwhile, the AC writes about the secrecy surrounding Jiangxi Mining purchasing about 9.9 per cent of FQM, listed on the Toronto Stock Exchange.

It says the purchases have come through: “derivatives and direct stock purchases and have so far cost about $800 million.”

“It would take about $2 billion to give Jiangxi a shot at majority control. Meanwhile, there is a standstill agreement between FQM and Jiangxi in which the Chinese have agreed not to take over without the approval of FQM’s managers and shareholders,” explains AC.

“Glencore’s Zambian mine, Mopani, may also be ready for the auction block.”

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