Anglo American announces agreement on the future of the Konkola Copper Mines ("KCM") in Zambia
19 August, 2002
On 24 January 2002, Anglo American plc ("Anglo American") announced that, in view of the substantial losses suffered by KCM, the weak outlook for the copper and cobalt markets and the non availability of project finance for the Konkola Deep Mining Project, Anglo American could not justify investing further funds in KCM over and above those committed at the time of vesting.
Anglo American is pleased to announce that agreement has now been reached with the Government of the Republic of Zambia ("GRZ"), ZCCM Investments Holdings plc ("ZCCM"), the International Finance Corporation ("IFC"), CDC Group plc ("CDC") and Zambia Copper Investments Limited ("ZCI"), subject to regulatory approval, to restructure KCM and for the withdrawal of Anglo American, IFC and CDC as direct or indirect shareholders of KCM.
Since the announcement on 24 January 2002, Anglo American, through ZCI, has contributed US$82 million to KCM, in order to maintain operations while negotiations have taken place with the other stakeholders. Anglo American, GRZ, ZCCM, IFC, CDC and ZCI have now agreed to the following:
- In addition to the US$82 million already expended, Anglo American has agreed to contribute US$30 million in cash to KCM and up to US$26.5 million as a loan on favourable terms, in order to keep the mines operating.
- Transitional management arrangements have been agreed and Anglo American will provide certain services until 31 March 2003, in order to ensure a smooth hand over of management responsibility to the new board of directors of KCM.
- The IFC and CDC have both sold their interests in loans to KCM and ZCCM in exchange for a payment by Anglo American of US$25.4 million to each of them.
- Through a series of transactions, KCM and ZCCM (SmelterCo) Limited ("Smelterco") will be restructured such that the new shareholders of KCM will be: ZCI 58% and ZCCM 42%. KCM will own and operate the Konkola mine, the Nchanga underground and open pit mines, the Nampundwe pyrite mine and the Nkana smelter and refinery, all of which are in significantly better condition than at the time of privatisation as a result of the capital investment programme funded by Anglo American. At the conclusion of the transactions both KCM and ZCI will be substantially debt-free.
- Anglo American will establish an independent company, the Copperbelt Development Foundation, and will transfer a 41.4% shareholding in ZCI to the Foundation. The Foundation will use any income from ZCI to invest in projects aimed at diversifying the economy of the Zambian Copperbelt and mitigating the social impact of the eventual closure of the KCM mines. The balance of ZCI shares held by Anglo American will be transferred to an employee incentive scheme intended to align the objectives of the new KCM management team and employees with those of the new shareholders.
At the time of the statement regarding its withdrawal, Anglo American announced a provision of US$350 million against its investment in KCM. The agreement now reached with GRZ, ZCCM, IFC, CDC and ZCI requires Anglo American to provide an additional amount of US$34 million, over and above the US$350 million already provided, in full and final settlement of all liabilities in relation to KCM.
Commenting on the agreement, Simon Thompson, Chief Executive of Anglo American Base Metals Division and retiring Chairman of ZCI and KCM said: "The finalisation of these complex negotiations allows KCM to continue to operate, in accordance with the objectives of the Government, and provides an opportunity for Zambia to diversify its economy and reduce its dependence on copper. The newly formed Copperbelt Development Foundation, endowed by Anglo American, will work with other stakeholders in pursuit of this goal.
Despite incurring substantial losses, Anglo American has demonstrated its commitment to acting in a socially responsible manner with regard to its withdrawal from KCM and has also protected the interests of the minority shareholders in ZCI by providing them with a debt-free vehicle in which they can continue to participate in the future of KCM."
Notes to Editors:
Prior to the above agreement the shareholders of KCM were:
- ZCI (50.9% owned by Anglo American) - 65%
- ZCCM (87.6% owned by the GRZ) - 20%
- IFC - 7.5%
- CDC - 7.5%
As a result of the above agreement, the new shareholders of KCM will be ZCI (58%) and ZCCM/GRZ (42%).
Anglo American plc is one of the world's largest mining and natural resource groups. With its subsidiaries, joint ventures and associates, it is a global leader in gold, platinum group metals and diamonds, with significant interests in coal, base and ferrous metals, industrial minerals and forest products. The group is geographically diverse, with operations in Africa, Europe, South and North America and Australia. (www.angloamerican.co.uk)
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