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An economist, Oliver Saasa, has assured Zambians that ZCCM-IH’s stake in Kansanshi mine owned by the First Quantum Minerals (FQM) remains intact and secured.
This is despite the signing of the recent agreement where ZCCM-IH entered into a transaction with FQM to convert its dividend rights and 20 percent equity value in Kansanshi Mining Plc (KMP) into a life of
mine royalty.
Saasa argued that ZCCM-IH in the transaction agreement would continue to hold all of its current shares, meaning that it continued to be a 20 percent shareholder in Kansanshi.
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He explained in a post shared on Mining Zambia magazine today Monday in Zambia’s capital, Lusaka that ZCCM-IH also under the agreement continued to have two Directors (out of 10) on the Kansanshi Board,
with voting rights.
In terms of governance, Saasa said, ZCCM-IH had full visibility of Kansanshi’s operations, including the right to attend the mine site and to inspect its books and records to ensure it was satisfied with
royalty calculations.
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He stated that this agreement could be viewed as a neat solution to the misalignment of FQM and ZCCM-IH’s interests which, ultimately, had been inhibiting production at Kansanshi.
“It is also worth bearing in mind that, should First Quantum ever want to sell its stake in Kansanshi even though ZCCM-IH has a minority shareholding it continues to hold its pre-emptive rights, meaning that it has priority over other potential buyers of First Quantum’s shares.
“It is my expectation that the full details of the financial impact of the restructuring on ZCCM-IH will be made public by ZCCM-IH itself prior to its AGM, when shareholders are expected to approve the agreement. Perhaps it may be helpful for the Government and ZCCM-IH to clarify these details for the general public before then,” he told Mining for Zambia magazine.
Economist Oliver Saasa
He said ZCCM-IH would now directly benefit from reinvestment and expansion of operations as any increase in production would be reflected in a commensurate increase in the royalty payment.
Saasa said this would no longer be a source of disagreement.
“As I said before, there had previously been an inherent conflict of interest between ZCCM-IH and FQM and its investors, over the use of annual returns for reinvestment.
“Similarly, if the copper price rises, then so will revenues earned (as the price of each unit of copper sold increases) so ZCCM-IH will benefit here too,” he said.
He explained that the agreement was much part of the wider ‘reset’ between FQM and the Government, first announced in May this year with these massive investments into the Kansanshi expansion, and the new
Enterprise nickel mine.
“If we are to kick-start our mining industry back to life, it is essential that the interests of the parties involved are aligned towards driving production. For that reason, this agreement genuinely is a win-win for both parties, and I think this has been overlooked in much of the analysis so far,” Saasa said.
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