Trafigura, a leading global commodity trading firm, has emerged victorious in the race to secure a significant share of zinc concentrate from the Democratic Republic of Congo’s (DRC) brand-new Kipushi mine. This win comes after Glencore, another major player in the zinc market, unexpectedly withdrew from a previously agreed-upon deal to purchase the entire supply.
New Buyers Step Up for Kipushi Mine
Ivanhoe Mines, the company behind the Kipushi mine, recently commenced production and is finalizing offtake agreements with several new clients. These buyers include Trafigura, China’s Citic Metal (already a 24% shareholder in Ivanhoe), and Boliden, a Swedish mining and smelting company.
The Kipushi mine is on track to become one of the world’s largest zinc producers, boasting an annual output exceeding 250,000 tons. The mine will produce zinc concentrate, a semi-processed form of zinc ore that is currently experiencing a significant supply shortage.
This deal significantly strengthens Trafigura’s position within the zinc concentrate market. Notably, neither Glencore nor its main competitor, IXM, was able to secure any portion of the offtake agreement. Glencore, once a dominant force in the zinc market, has undergone recent leadership changes within its zinc unit and is reportedly exiting some investments.
Tight Zinc Concentrate Market Creates Opportunity
The zinc concentrate market is currently experiencing a supply crunch, leading to a substantial drop in processing fees paid by miners to smelters. This trend is attributed to a combination of factors, including lower-than-expected mine supply and the reopening of European smelters following the 2021-2022 energy crisis. Spot market treatment charges, which reflect processing fees, have plunged to their lowest level since at least 2014, according to Fastmarkets. Benchmark treatment charges, negotiated annually, have also seen a 40% decrease in 2024.
Last year, Ivanhoe announced a term sheet agreement with Glencore for the sale of the Kipushi mine’s entire zinc output. This deal included a $250 million financing facility for Ivanhoe. However, Glencore has since walked away from the agreement, reportedly due to personnel changes within its zinc department. Notably, Nick Popovic, co-head of zinc and copper trading at Glencore who participated in the Kipushi term sheet signing ceremony, retired from the company shortly thereafter.
IXM Negotiations Fall Short
IXM, the metals trading arm of China’s CMOC Group, was also reportedly in advanced talks for a share of the Kipushi offtake agreement. However, IXM was unable to finalize a loan deal in time, and the company recently announced the departure of its head of lead and zinc, Xavier-Alexandre Ortiz.
While Ivanhoe declined to comment on the specific details of the new offtake agreements, the company previously acknowledged receiving additional interest from potential buyers since the Glencore term sheet was signed. Ivanhoe also stated it was negotiating financing deals of $200 million or higher with various parties. Finalization of the contracts is underway, and there’s a possibility that not all negotiations will be successful.
Glencore’s withdrawal from the Kipushi deal signifies a broader shift within its zinc business. The company once held a dominant position in the market, boasting a share exceeding 50% of the “addressable” zinc metal and concentrate market, according to its 2011 IPO prospectus. Recent developments include the aforementioned leadership changes within Glencore’s zinc unit, the appointment of a new head for its lead and zinc assets, and the sale of its controlling stake in Peruvian zinc miner Volcan Cia Minera SAA.
Trafigura’s acquisition of a share in the Kipushi mine deal reflects the evolving dynamics of the zinc market. With Glencore seemingly stepping back, Trafigura is capitalizing on the opportunity to solidify its presence in the zinc concentrate market. This move strengthens Trafigura’s position as a key player in the global zinc trade.
Source: Mining.com
