(Yicai) Jan. 22 -- JCHX Mining Management said the Chinese contractor plans to acquire an 80 percent stake in Zambia’s Lubambe Copper Mine, which is technically insolvent, for just USD2, with the aim of turning around its namesake mine.

JCHX will set up a project company to buy the stake for USD1 from a unit of private equity firm EMR Capital, the Beijing-based company announced late yesterday. The other USD1 will buy the target firm’s USD857 million debt from the seller.

The Zambian government's investment company owns the other 20 percent of Lubambe Copper Mine, JCHX noted.

JCHX said it may need to invest about USD305 million in Lubambe Copper Mine to fund a technological upgrade and daily operations at the mine.

At full capacity, the mine should achieve an average after-tax profit of USD12.7 million a year based on USD8,300 per ton of copper and a 14-year scheduling period, resulting in an after-tax payback period of nearly seven and a half years, it said.

Shares of JCHX [SHA: 603979] closed 3.1 percent lower at CNY35.95 (USD5) each today, after earlier dropping by as much as 4.6 percent. The benchmark Shanghai Composite Index fell 2.7 percent.

In addition, the seller needs to make a loan of USD40.5 million through JCHX for Lubambe Copper Mine as a part of the deal, while JCHX will lend the miner an additional USD20 million to repay all of its third-party senior commercial debt to give its new majority owner a clean slate. 

JCHX will repay the loan provided by the seller in tranches under terms agreed upon by the pair starting in 2027. The loan repayment process will be trigged only if the LME Cash Settlement Price at the time is above USD 8,818 per ton.

Lubambe Copper Mine mainly extracts and treats copper from Lubambe mine, which has not reached its designed capacity since commissioning, JCHX said. Its net loss widened to USD60.3 million in the first nine months of last year from USD58.3 million in the whole of 2022, while its net assets stood at minus USD15.2 million as of last September.

JCHX has been the underground mining services provider of Lubambe Copper Mine since 2017, it said. With better mining and treatment schemes, the new majority owner is confident that the mine should be able to produce an average of 77,500 tons of copper concentrate with 32,500 tons of copper metal contained a year, and swing back into the black, the firm said.

Editor: Martin Kadiev