Saudi Arabia’s Manara Minerals Pursues Significant Stake in Zambian Mining Assets Despite Operational Challenges

Saudi Arabia’s Manara Minerals is nearing a deal to acquire up to 20% of First Quantum Minerals’ Zambian assets, valued at $1.5 billion to $2 billion. This move comes as First Quantum seeks to restructure amidst significant revenue losses and increasing debt. Zambia, crucial for copper production, faces infrastructure and power challenges, impacting the mining sector’s growth potential.

Saudi Arabia’s Public Investment Fund (PIF) and Ma’aden, through their joint venture Manara Minerals, are reportedly close to finalizing a deal to acquire between 15% and 20% of First Quantum Minerals’ (OTC:FQVLF) Zambian copper and nickel assets, which include the renowned Kansanshi and Sentinel copper mines, as well as the Enterprise nickel mine. The transaction is estimated to be valued between $1.5 billion and $2 billion, marking a significant move for the Fund as it continues to bolster its investment portfolio. Previous investments by Manara include a $1 billion commitment to Barrick Gold’s Reko Diq project in Pakistan and a substantial $2.5 billion in Brazilian mining giant Vale. The divestment from Zambian assets is perceived as a strategic maneuver for First Quantum to manage its increasing debt levels while maintaining control over essential operational assets. The context of this transaction becomes crucial when considering First Quantum’s revenue challenges, especially after the Panamanian government mandated the shutdown of its flagship Cobre Panama mine, urging the firm to explore capital restructuring options, including asset sales and a $1 billion share offering. Zambia stands out as a vital contributor to global copper supply, essential for the ongoing green energy transition. Recently, a startup backed by prominent billionaires such as Bill Gates and Jeff Bezos announced a major discovery of one of the largest copper deposits in Zambia’s history at the Mingomba site. However, the Zambian mining sector encounters significant hurdles, particularly regarding infrastructure, with underdeveloped road and rail systems impeding material logistics and persistent power supply issues. The country, which relies heavily on hydropower for its electricity needs, has been experiencing frequent shortages due to droughts and erratic rainfall patterns. For First Quantum and similar companies, maintaining a reliable power supply is of utmost importance. The firm has implemented emergency measures, including the importation of electricity from South Africa’s Eskom, to counteract production disruptions caused by power outages. Such operational challenges pose risks for foreign investment as the mining industry, contributing up to 70% of Zambia’s exports while consuming approximately half of the national power supply, aims to enhance copper output to 1 million tons per year by 2026, a target laden with ambitious goals.

Saudi Arabia is aggressively pursuing investments in the global mining sector, particularly in copper and nickel assets, which are critical for the future of green energy. First Quantum Minerals, a significant player in the Zambian mining industry, is facing considerable challenges, including loss of revenue due to external shutdowns, a high debt burden, and ongoing infrastructure issues within Zambia’s mining sector. Zambia’s copper output is particularly vital as the demand for copper grows due to its importance in renewable energy technologies, yet substantial infrastructure bottlenecks and energy supply inconsistencies hinder the landscape for mining investments. Navigating these challenges becomes critical for companies intending to operate in this region.

The impending acquisition of a stake in First Quantum’s Zambian assets by Saudi Arabia’s Manara Minerals represents a strategic investment aligned with the growing demand for copper in the green energy sector. However, the challenges faced by First Quantum—stemming from external pressures and inherent infrastructural limitations in Zambia—underscore a complex operational landscape. The success of this investment and operational goals hinges not only on adept financial management but also on addressing the critical infrastructure and power supply issues that plague Zambia’s mining industry.

Original Source: www.benzinga.com