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» Long wait in store for ZCI
» Arbitration over ZCI stake due mid-2007
» ZCI dogged by new complications

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ZCI, Vedanta saga wrapped up by April
Allan Seccombe
Posted: Wed, 02 Jan 2008

[miningmx.com] -- ONE way or the other the bitterly contested transaction between Zambia Copper Investments (ZCI), the owner of 28.4% of Konkola Copper Mines (KCM), and Vedanta Resources over that stake will be resolved by April, ZCI’s chairman Thomas Kamwendo said.

ZCI is dissatisfied with dividends from KCM and will push for higher payments, but it remains to be seen what exactly its role in the mining company will be in the next three months when Vedanta can either follow its rights to ZCI's stake in KCM or not.

The Zambian government is leaning on the diversified London-listed metals and mining group Vedanta, which already owns 51% of KCM, not to follow its option on the ZCI-held shares.
completed one way or another
A dispute that started in September 2005 over the value of ZCI’s holding in KCM was resolved in July last year in a ruling by an arbitrator. A bank is now valuing that stake.

The arbitrator has decided ZCI’s stake in KCM should be valued as of the date – 12 August 2005 -- on which the call option was exercised by Vedanta.

The bank undertaking the difficult valuation has said it will release its findings in mid-January this year instead of mid-December as originally thought.

ZCI is obliged to abide by the valuation, but Vedanta does not have to exercise its option to buy the stake.

“The call option process is expected to be completed one way or another before the end of the Company’s present financial year (in March),” Kamwendo said in a statement accompanying the company’s interim results.

“The Board is actively considering and evaluating the various options that are open to ZCI and its shareholders, in the event that Vedanta elects to accept the option exercise price determined by the Bank and, as a consequence, should the sale complete.”

There were no details of what these options might be.

KCM was held by Anglo American, which returned the asset to the Zambian government’s mineral company ZCCM in 2002. Vedanta reportedly bought 51% of KCM in 2004 for around $45m to $50m.

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The Zambian government and economists are unhappy that the single largest copper company is Zambia will be 79.4% owned by a foreign group. There have been calls for ZCI’s stake in KCM to be listed on the Lusaka stock exchange.

"We have written to them (Vedanta) over the matter of taking over the ZCI shares. As government, we are of the view that they stick to what they have in KCM and we are urging them not to exercise the call option," Zambian Minister of Mines and Mineral Development Kalombo Mwansa is quoted as saying in the Zambia Daily Mail. "Our understanding is that the ZCI shares should be listed on the Lusaka Stock Exchange or any other alternative measure that will benefit and empower Zambians," Mwansa said.

Legally, Vedanta has a right to the shares.

“ZCI’s shares in Konkola are being offered to Vedanta rather than being sold through the Lusaka exchange or sold in any other way because that is the provision of the legal agreement that was reached at the time Vedanta was acquiring its current 51% shareholding in Konkola,” Kamwendo is quoted as saying in the Zambian Chronicle.

Vedanta reported interim copper cathode output of 79,000 tonnes from its tailings and mining operations at KCM.

An expansion project called Konkola Deeps has seen costs rocket to $674m from $400m because of a revised increase in output by nearly 40% to 7.5 million tonnes a year as well as general input costs. The Nchanga smelter expansion costs have risen by $92m to $372m to boost capacity by 50,000 tonnes to 300,000 tonnes.

In the interim period to end-September 2007, ZCI received a dividend payment of $1.6m in October.

“While welcoming the fact that KCM continues to declare dividends, the Directors are firmly of the view that these are below the levels that KCM`s shareholders should expect and will maintain pressure on the KCM Board in this respect,” said Kamwendo.