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ZCI dogged by new complications
Michael Coulson
Posted: Wed, 25 Oct 2006
[miningmx.com] -- INVESTORS in Zambia Copper Investments (ZCI) who thought the acquisition of a majority stake in the Konkola mine by India’s Vedanta would end their problems, and lead to a speedy and profitable resolution, have already had a long wait. Fresh complications were brought on October 23.
It’s well over a year since the process of engaging an independent investment bank to value ZCI’s remaining 28.4% of Konkola started.
Now, though agreement has been reached on the terms of such an engagement, a “material” dispute has arisen over the option agreement giving Vedanta the right - but not obligation - to buy the remaining Konkola shares at that valuation.
ZCI’s somewhat opaque announcement doesn’t make clear why, but for whatever reason the appointment of the investment bank can’t be proceeded with until this dispute is settled.
ZCI has issued a notice of
arbitration to Vedanta, but heaven knows how long that will take, or even whether the finding will be final.
And even if the ruling is favourable to ZCI, how long will it still take before shareholders see any cash rewards?
Just over a year ago, when the share was still suspended, it looked as if the pre-suspension 485c could be cheap. Since relisting, it’s traded, albeit thinly, between R10 and R25, and is now R17.
While tangible NAV means little to a mining company, on the latest information at hand is about R5 a share.
The current market price imputes a huge premium to this, though it must be said that the see-through p:e multiple is in the low single digits; on balance, though, for investors who are long-term (that is, pre-suspension) holder, it might be better to take the bird in the hand and sell through the market rather than wait for the two birds that may be in Vedanta’s bush.
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