Glencore plans to sell 40% stake in Congo mines to US-backed consortium

[Ben Graham]

Glencore (LSE: GLEN) has entered a non-binding memorandum of understanding regarding the potential sale of a 40% stake in its mine assets in the Democratic Republic of Congo to the Orion Critical Mineral Consortium (Orion CMC).

Glencore currently operates the Mutanda and Kamoto mines in DRC’s Lualaba province — both large-scale producers of copper cathodes and cobalt hydroxide. Last year, they produced 247,800 tonnes of copper — roughly 30% of the group’s global output — and 35,100 tonnes of cobalt.

Under the proposed deal, Orion CMC would acquire 40% of Mutanda Mining (MUMI) and Kamoto Copper Company (KCC), both majority held by Glencore (95% and 75% respectively), for a total enterprise value of $9 billion.

Additionally, Orion CMC may appoint non-executive directors in respect of the assets and direct the sale of the relevant share of production to nominated buyers, in accordance with the US–DRC strategic partnership agreement. Upon completion of the transaction, the mines would continue to be managed as part of the Glencore group.

Orion CMC was established by Orion Resource Partners last October with the backing of Abu Dhabi’s ADQ and the US International Development Finance Corp. (DFC). Together, the parties sought to invest upwards of $5 billion to support the US and its allies in their critical minerals push.

In a statement issued on Tuesday, Orion said the companies will seek opportunities to expand and develop the asset in partnership with the DRC government and state-owned miner Gécamines, Glencore’s existing partner in KCC.

They will also look to acquire additional critical mineral projects and assets in the DRC and the African copper belt more broadly, it added.

US-Congo partnership

“This proposed partnership between Orion CMC and Glencore has the potential to bring significant returns for both the United States and the DRC,” DFC CEO Ben Black said. “CMC’s potential investment would reflect the growing relationship between the US and the DRC, help secure a reliable source of critical minerals for the United States and our partners.”

In December, DFC pledged to invest more than $1 billion in two major projects as part of the US-DRC strategic partnership. These include plans to support a new copper and cobalt venture between Gécamines and commodity trader Mercuria Energy, as well as a rail project linking Congo and other central and southern African nations to Angola’s coast.

US Deputy Secretary of State Christopher Landau said the proposed transaction between Orion CMC and Glencore “reflects the core objectives of the US-DRC Strategic Partnership Agreement by encouraging greater US investment in the DRC’s mining sector and promoting secure, reliable, and mutually beneficial flows of critical minerals between our two countries.”

“Through this partnership, we would be able to support the ambitions of the US government and private sector with the supply of two critical minerals,” Glencore CEO Gary Nagle said.

The move comes as Glencore continues to work out details on its proposed combination with Rio Tinto (ASX, LSE: RIO), which would create a copper-mining behemoth with a market value of more than $200 billion.

Shares of the Swiss group rose 2.9% on Tuesday on the asset sale announcement, taking its market capitalization to approximately £61 billion.