Zambia’s state mining agency has agreed to purchase Glencore’s majority stake in Mopani Copper Mines for $1.5 billion, belying the government’s perilous financial situation that has seen the Southern African nation become the first pandemic-era sovereign debt default in the continent last year.

In announcing the deal, the government said the move was a result of the Glencore’s attempt to suspend operations at Mopani last year because of low copper prices and COVID-19 disruptions.

Zambia’s government will take on more debt in acquiring the stake, and it will seek a new investor, a matter that financial analysts in Lusaka say is unlikely in the “near term.”

The acquisition coincides with the copper producing nation’s preparedness for elections in August with President Edgar Lungu courting votes in the copper belt. More than 15,000 workers would have lost their jobs if the mine was closed, Mines Minister Richard Musukwa said.

Glencore said that Zambia’s state mining agency, ZCCM-IH, will borrow the $1.5 billion from Carlisa Investments Corp, a British Virgin Islands-based firm through which Glencore holds its stake, and other unspecified members of the Glencore group.

Under the deal, ZCCM-IH will acquire the remaining 90% of Mopani from Carlisa, giving it full control of the company for an indicative $1.

Glencore will retain buying rights for Mopani’s copper output until the transaction debt has been repaid. ZCCM-IH will repay the loan principal by giving Glencore creditors 3% of Mopani’s gross revenue from 2021-2023 and 10-17.5% of Mopani’s gross revenue from then on.

ZCCM-IH will also owe quarterly interest of LIBOR plus 3%.

At a ceremony in Lusaka, Musukwa said ZCCM-IH will repay the loan in 10-17 years depending on copper prices, which are currently near their highest in eight years at about $8,000 a tonne.

Asked how Zambia can afford to take on more debt, a mines ministry official said: “It’s not sitting on the ministry of finance. The company is able to pay on its own.”

Zambia’s Mines Minister Musukwa remains optimistic that the country will bely all financial expectations and attract a new investor at Mopani, saying that companies from Britain, Canada, China, South Africa, Turkey and Qatar have expressed interests.

In the meantime, the government requires nearly $300 million to complete expansion projects started by Glencore.

“Zambia is not the easiest place to do business at the moment and that has probably stymied a lot of investor interest,” said Liberum mining analyst Ben Davis.

“At these commodity prices, all assets are good assets, but it hasn’t been that great for Glencore over the past few years.”

Mopani produced 34,479 tonnes of copper last year, up 14.6% from 2019, and the expansion projects will boost output beyond 150,000 tonnes a year, Musukwa said without specifying a timeline.

Glencore said it holds 73% of Mopani through an 81.2% stake in Carlisa. First Quantum Minerals, which previously held 16.9% of Mopani, did not immediately respond to a request for comment.

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