VEDANTA will continue to press for a meeting with Zambia president Edgar Lungu ahead of a High Court hearing set down for Friday.
The court hearing is to rule on an application to provisionally liquidate Konkola Copper Mines (KCM) which Vedanta controls. The liquidation order was brought by KCM’s 20.6% shareholder, ZCCM Investment Holdings (ZCCM-IH), a company listed in Lusaka.
Vedanta is expected to defend the application. ZCCM-IH is controlled by the Zambian government. Earlier this year, the government floated the idea of selling a 17% stake in ZCCM-IH with First Quantum Minerals, listed in Toronto, interested in bidding.
“Vedanta and KCM reiterate their request for an immediate and urgent meeting with Mr Edgar Lungu, President of Zambia, to discuss the matter,” KCM said in a statement issued this afternoon. It added that it faced crippling costs related to new duties imposed by the Zambians last year which include a 1.5% increase in the mineral royalty rate.
“The most recent restrictions and duty on concentrates have negatively impacted the running of the smelter and the much-needed acid to run its operations,” it said. “In addition, the Zambian government owes the company more than $180m in VAT refunds which has made the situation even more challenging,” said KCM.
Zambia applied a 5% import duty on concentrates which makes it difficult for KCM to process copper. Earlier this year it suspended production of a smelter because acquiring a certain grade of acid was proving problematic.
“KCM is seeking to meet with the government as a matter of urgency to discuss the future of KCM and the impact that the current onerous situation is having on the company, the people of the Copperbelt and the Zambian people as a whole,” KCM added.
Reuters reported earlier today that Zambia had appointed a legal firm to act as provisional liquidator of KCM. Citing a court document, Reuters said Zambian law firm Lungu Simwana & Company had been appointed as administrator. This comes a day after Zambian president, Edgar Lungu, stripped KCM of its mining licence.
Visiting the copperbelt at the weekend, Lungu spoke of driving through a divorce of KCM and his country. His language was severe, saying that foreign investors were treating the country as if its leaders were “fools”.
The government also plans to introduce a new investor. “Potential buyers appeared to have been lined up including Chinese buyers,” a market source said. “Zambia owes the Chinese government significant loans will are due to be called upon next year,” the source added. It is also election year, next year.
Zambia’s outstanding debt stood at about $9.5bn, about a third of gross domestic product up from $8.7bn at the end of 2017. The International Monetary Fund has said the country is at high risk of debt distress, according to reports.
There is also political pressure on the Lungu administration.
In April, Lungu’s Patriotic Front lost a by-election in the Roan district of the copperbelt, a former party stronghold. According to Zambia press reports, the loss was a serious wake-up call for Lungu.