Novi Weekly Wrap - June 22 Edition

First Quantum Minerals acquires Argentina's Lumina Copper Corporation

Canadian mining giant First Quantum Minerals (FQM) acquired Lumina Copper of Argentina in a $470m dollar cash and stock deal. The $10 per share cash portion of the deal will represent a 28% premium over Lumina'sJune 16 2014 closing price on the TSX Venture Exchange. The project will boost copper production to over 1.3 million MT by 2021. This is FQM's second acquisition in the space of 15 months after completing the the Inmet Corporation deal in 2013.

FQM owns 80% of Kansanshi copper mine which generated $1.83bn of revenue in 2013 which accounted for 51.5% of its total revenue for that financial year. The comapny has mining projects all over the world but Kansanshi is currently its bread and butter. The Lumina deal is seen as a continuation of FQM's geographical diversification objective. Zambia will continue to have the mainstay of FQM's operations for a while even more so as thier $2bn Sentinal project is closes in on completion this year closely followed by the Enterprise (Nickel) project which will go live in the first quarter of 2015. However, FQM and other mining players in Zambia will be keeping a close eye on the Mine and Minerals Development Act which is currently undergoing revision.

Government sets mealie meal floor-price for 2014/15 marketing season

The Minister of Agriculture announced the floor price of mealie meal for the upcoming crop marketing season to be K70 per 50kg bag, up 7.7% from the previous year. This comes after a bumper harvest of 3.35m MT was announced this earlier this year. The Food Reserve Agency has a mandate to procure only 500,000MT at that price for the country's strategic reserves - the rest can be sold to private buyers.

The Zambia National Farmers Union expressed their disappointment at the floor price, saying that regional prices are much higher at $420 per MT i.e. $21 (approx K128) per 50kg bag. To us that sound more like an ooportunity for farmers to export mealie meal at a premium. Regional demand is indeed very high which is why there were numerous incidences of mealie meal smuggling to places like DRC, Zimbabwe etc while the export ban was in place - which is no longer the case. Bottomline, if farmers want to earn K128 per 50kg bag, they shouldn't look to the FRA because the opportunity lies with exports (and there will be an over-supply in Zambia as a result of the bumper harvest). It will be tough for most to export because they don't have the means or know-how hence they will probably end up taking a significant haircut on that K128 per bag.

Airtel Zambia system error affects subscribers talk-time balances

Airtel Zambia had a technical problem which mistakenly deducted talk-time worth K900, 000 from the sim cards of 28,000 subscribers. The affected subscribers were refunded and compensated with 30 minutes free of talk time (within network) for the inconvenience. This comes a few months after Airtel was surpassed by MTN Zambia as the number 1 service provider in Zambia by subscribers.

The Airtel brand will continue to lose its appeal to subscribers should this kind of thing continue to happen on top of all the other customer complaints which will benefit MTN and Zamtel - we know the former is up to the task but is Zamtel up for it? The Airtel glitch also opens up some unanswered questions - how many times has this type of error happened before under all subscribers? Was it released to the public and were they refunded? Those are questions that only the 3 mobile service providers can answer.

Batoka Ireland's mandatory offer receives few takers

Batoka Ireland made a mandatory offer for to acquire 780 million shares of Copperbelt Energy Corporations (CEC) which were not held by Zambia Energy Corporation (which owns 52% of CEC) at K0.674 per share earlier this year. The offer received very few takers with only 5.7 million shares (0.73%) being tendered to Batoka Ireland by 42 retail investors and 1 institutional investor (what were they thinking??!!). As a result, the shareholding structure remains the same as it was prior to the offer:

CEC is going places, not only in Zambia but in the rest of Africa as well so it was not a very smart move to sell any shares at this point and at that price - too much money would be left on the table.

China's Vice President visits Zambia

China's vice president Li Yuanchao landed in Zambia for a 4 day state visit which saw $64m worth of deals randing from concessional loans to technical corporation agreements signed. The two countries have had a cordial relationship that spans over 50 years.

The PF government changed their tone on Chinese investment after campaigning heavily against it prior to the 2011 elections. Zambia-China trade increased by 11.8% in 2013 to $3.8bn. China has a lot to offer Zambia but by no means should they be seen as the 'ultimate investor' - Zambia needs to continue fostering relationships with other emerging nations like Turkey, Brazil as well as other Asian economies like South Korea. Lets also not forget the US's AGOA which is currently not being fully utilized.

Bank of Zambia raised the cap on lending rates to 28% - they have introduced a number of monetary tightening measures to prop up the Kwacha this year which has mad credit more expensive.

The LuSE all-share index closed Friday at 6,011.65 points down 0.38% from the previous day. 145,869 shares were transacted in 19 trades resulting in a turnover of K892,243.