THE FRAUDULENT PRIVATISATION OF MOPANI COPPER MINES PLC
AS Convenors of the People’s Political Consultative Conference (PPCC), we agree with many citizens such as Ms Edith Nawakwi, Dr. Fred M’membe and others that the sale of Mopani Copper Mines to Delta Mining Limited, a subsidiary of International Resource Holdings (IRH) that is headquartered in Abu Dhabi, United Arab Emirates was an act to defraud Zambia.
Our analysis of the publically available documents show that the UPND government are guilty of using creative accounting to commit fraud on Zambia. In other words, the UPND used accounting practices to misrepresent Mopani’s position. These practices are not only unethical but were also illegal as they simply advanced this scandalous and fraudulent deal.
Creative Accounting:
In the context of the Mopani deal, the UPND administration used the following unethical and illegal practices to purportedly sale 51 percent of the shares in Mopani Copper Mines PLC: Firstly, they structured the deal where they kept the major portions of financing or liabilities off Mopani’s Balance Sheet. That is the US$1.5 billion liability. Secondly, the revalued Mopani’s assets to inflated values to justify the investment and to boost financial ratios.
Thirdly, they capitalised expenses that should have been treated as operations costs to reduce operating expenses and inflate profits.
Fourthly, they used deferred tax accounting where they deferred tax liabilities to manipulate cash flows.
Fifthly, they recognised revenue prematurely before it is actually made. Sixthly, they failed to disclose liabilities such as environmental costs.
Seventhly, they used complex financial instruments like derivatives and special purpose entities like Jubilee to take over Kankoyo black mountain to obscure the true nature of the deal. And Eighthly, they used performance metrics where even the President of the Republic was invited to create a favourable impression at the time of the deal when the deal was not in the interest of Zambia.
Historical Note:
Mopani Copper Mines PLC (also known as Mopani) is a Zambian company that produces and sells copper and cobalt to the international market, being one of the biggest mines and exporters in the world. Mopani Copper Mines Plc was originally part of Zambia Consolidated Copper Mines Limited (ZCCM), and was stateowned until its privatisation in 2000.
Following privatisation, the
Zambian government retained a stake in the mining industry through ZCCM Investments Holdings Plc (ZCCM-IH) which is an investments holdings company, quoted on the Lusaka, London, and Euronext stock exchanges. The majority of its investments are held in the copper mining sector of Zambia.
Until recently, according to the data from the Paradise Papers – Barbados Corporate Registry, Mopani Copper Mines was owned by Carlisa Investments Corporation (a joint venture company comprising Glencore International AG (73.1 percent) and First Quantum Minerals Ltd (16.9 percent)) and ZCCM-IH (10 percent).
Minority shareholders were spread throughout the world, in various locations.
Mopani Asset:
The company has mine sites at Mufulira and Nkana, which are located on the Copperbelt. The head office is located in Kitwe near Nkana assets. Nkana has been in operation since 1931 and Mufulira, which has been in operation since 1933 lies 50 kilometres north of Kitwe.
The company operates the Mufulira mine, smelter, concentrator and copper refinery and the Nkana mine, concentrator and cobalt plant.
Mopani or MCM produced 134, 800 tonnes (148, 600 short tons) of copper and 2, 040 tonnes (2, 250 short tons) of cobalt in 2003. Copper production from internal sources was supplemented by the purchase of some 18, 000 tonnes (20, 000 short tons) of copper in high-grade oxide concentrate bought from the Democratic Republic of the Congo, and 185,325 tonnes of copper concentrate toll treated from Copper-miner Equinox in 2007.
At that time, MCM invested in a number of oxide copper projects at several of its properties, including an in-situ leaching project at Mufulira and leaching at Nkana, and has achieved significant production increases at its underground mining operations in Kitwe and Mufulira.
The company installed ISA smelt furnace, Matte Settling Electric Furnace, oxygen plant, at the Mufulira smelter during 2004 and 2005, at a total cost of US$213 million.
The Mopani Copper Mine has generated over $560 million in tax payments to the Zambian government since privatisation in 2000 through royalties, import/customs duties and income taxes.
At the Mufulira mine, there are three types of mining methods currently in use at Mufulira mine site. The first is the original drill and blast underground mining method (MCR – Mechanised Continuous Retreat or modified Sub Level Caving) used in Mufulira main, secondly Room and Pillar with waste rock backfill employed at Mufulira East Portal, and thirdly Insitu Leaching of old stopes.
The Mufulira Concentrator operates in a conventional manner, and has a capacity of 8, 500 tonnes of ore per day. Primary stage crushing of ore is done underground while the secondary and tertiary stage crushing take place at the concentrator.
Ball mills grind the crushed ore for subsequent flotation to produce a copper concentrate grade of 40-43 percent. Concentrator recovery is approximately 94.5 percent.
The Mufulira smelter smelts the copper concentrate mixed with silica in the Isasmelt furnace. The product from the ISA furnace is matte and slag which goes to the Matte Settling Electric Furnace. Slag is tapped out and discarded. Matte is tapped out and taken to the PS converters for further processing to blister copper.
The blister copper is then further processed in Anode furnaces and, thereafter, the copper is cast into anodes in a twin casting wheel. The anodes are then sent to the refinery for electro-refining.
The Mufulira smelter was first built in 1937. Prior to privatisation in 2000, 100 percent of all SO2 went into the atmosphere, and the latest information confirms that the situation has improved since, including notably through the investment financed by EIB's loan to Mopani Copper Mine for modernisation of the copper smelter.
The project has successfully established the capacity to eliminate 170, 000 tonnes of sulfur dioxide a year, materially contributing to the protection of the environment. This improvement has been strongly contradicted by recent reports on the effects of pollution on local residents.
In the Mufulira Refinery (including the agitation leach, heap leach, SX and EW plants) copper anodes coming from the smelter are electro-refined to produce cathodes having 99.99 percent Cu and conforming to LME grade A.
This is done by putting anodes and cathodes alternately in a cell, in which copper sulphate electrolyte solution is circulated and current is passed.
Copper ions thus generated from anodes move towards cathode and get deposited on starter plates (cathodes). The cathode plates are taken out from the cells at a certain interval. The cathodes thus produced are bundled and are mostly exported.
During electrolysis precious metals like gold, silver, platinum, selenium, palladium etc. settle down along with other impurities at the bottom of the cells. This is removed and collected at the end of anode cycle. This product known as anode slime is washed, dried packed and exported for recovering precious metals.
At the refinery there are also three SX plants and one electrowinning plant. PLS from the Agitation Leach, Mufulira West heap leach and In-Situ Leach operations are first treated at SX Plants and then taken to the electrowinning plant for the production of copper cathodes. The Nkana mine is one of the largest in Africa, a copper mine located 1 km south-west of Kitwe.
At Nkana mine, copper and cobalt ore is produced from five sources: Four underground mines namely: Mindola North Shaft, Mindola Sub Vertical Shaft, Central Shaft, South Ore Body (SOB) Shaft and Open Pits dotted across the Nkana Oxide Cap. Vertical crater retreat (VCR), both caving and postfill, have been the predominant mining method utilised within the Nkana mine, but is now being converted to a combination of sub-level caving (SLC) and open stoping techniques. Vertical shafts from the surface provide access to each of the four underground mines. In addition, in the deeper sections of the Mindola mine and Central Shaft, sub vertical shafts extend services to the 5500L and 3580L respectively.
The Nkana mine has been in operation since 1932 and has produced 6, 000, 000 tonnes of copper ore so far. Its reserves underground include 108,145, 000 tonnes of ore at 1.83 percent copper and 0.12 cobalt.
Copper and cobalt mineralisation occur within the ore shale. Copper mineralisation in the deposits changes from mostly chalcopyrite in the South Orebody, to chalcopyrite-bornite in the Central area and to bornite-chalcopyrite at Mindola. Cobalt occurs as carrollite and cobaltiferous pyrite in approximately equal proportions. The mine produces copper and cobalt from three sources: Mindola Shaft, Central Shaft and South Orebody Shaft. Vertical crater retreat is the predominant mining method while sublevel open-stopping and sublevel caving methods are also used. In April 2011 Mopani announced its intentions to sink a new $295 million shaft at Mufulira. This was going to extend the life of the mine by some twenty-five years. The synclinorium shaft was going to give access to 115 million tonnes of copper ore. Once commissioned in the first quarter of 2015, it was estimated that 600 jobs were going to be created.
The Nkana Concentrator is located in Kitwe and treats copper-cobalt sulphide ore using a bulk flotation and segregation flotation flowsheet to produce separate copper and cobalt concentrates. The Nkana Concentrator is one of the most important mineral processing units of Mopani, as it contributes to produce high purity cobalt metal.
The Nkana cobalt plant treats the cobalt concentrates to produce high purity cobalt metal. The plant is currently on care and maintenance.
In 2013, Mopani invested US$27 million to upgrade its Nkana Cobalt Plant which will result in an increase in production capacity from 2,800 tonnes to 7,000 tonnes of cobalt metal per annum.
The gross value of the assets of MOPANI exceed US$9 billion by some estimates.
The Plunder of Zambia’s Minerals:
It is not known with exactitude what Glencore benefited from its Zambian operations. What is known is that MOPANI never declared any dividends to its shareholders and always reported losses in its final accounts. This was despite the high prices of base metals on the international market. Zambian authorities foolishly allowed this to happen as they removed all exchange controls and allowed the owners of Mopani to loot Zambia.
There is one report of fraudulent trading which appeared in the documentary entitled “Zambie: A Qui Profite le cuive” online alleging fraudulent dissimulation of thousands of million dollars by MCM. The company was put under investigation and the President of the European Investment Bank (EIB) instructed the banking services in Europe to decline any further financing request from this company or its subsidiaries. It is this together with some report that Glencore was at that time facing operational challenges which may have compelled the foreign shareholders to decide to exit MOPANI Copper Mines PLC and surrender it to Zambian authorities for a $1.
To be continued...