Last week Glencore announced plans to invest more than $1.1 billion in its Mopani copper complex in Zambia over the next two years.
The investment, which will help improve the mine's operational efficiency and extend its life, is credit positive for the Southern African nation because it will help drive growth says ratings agency Moody's.
Glencore's expansion and upgrade plan for 75%-owned Mopani will return output to 110,000 tonnes per year by 2018 and reduce costs at the same time and will enable the Swiss mining and trading giant to "take advantage of the potential for a gradual recovery in copper prices over the next three to five years." Glencore acquired the historic Mopani complex in Kitwe province in 2000 after the mine was privatized and has since spent $3 billion on the project.
Initially Glencore said it's mothballing the mine after the government hiked taxes on the sector just as the copper price was nearing six-year lows and electricity shortages curtailed operations
At the moment Mopani, which employs 4,500 workers, is running at less than half its capacity with expected 2016 output just under 47,000 tonnes. Initially Glencore announced in September last year that it's idling the mine after the government hiked taxes on the sector just as the copper price was nearing six-year lows and electricity shortages curtailed operations.
Moody's projects Mopani which at full capacity in 2014 made up around 15% of Zambia's total copper output could lift the country's real GDP growth to 5% or more in 2018, by adding up to 0.5% of GDP that year.
"Increased copper production will also raise government revenues, contribute to fiscal consolidation and return public finances to a sustainable path. Additionally, Glencore's decision to invest now, when Zambia's economy faces challenges, sends a positive signal of investor confidence," according to the ratings agency.
The investment marks a positive turnaround for the mine and Zambia's entire copper sector, which has been stagnating following a sharp decline in copper prices and severe electricity shortages since 2015, says Moody's.
Mopani working at full tilt is expected to help boost Zambia's total copper output to 802,000 tonnes by by 2018. That could potentially lift the country to number seven spot on global production rankings ahead of Russia and Canada. Zambia produced 705,000 tonnes last year despite a drop in production at the country's biggest operation, First Quantum's Kanshansi.