SRINIVASAN Venkatakrishnan, CEO of Vedanta Resources, said he was “hoping and praying” that justice would prevail in Zambia where the company is fighting an application to liquidate its subsidiary, Konkola Copper Mines (KCM).
“I’m just hoping what happened to Acacia Mining doesn’t play out here. I’m hoping and praying … that the principles of justice will play out,” he said in a media conference call. He added Zambia was “law abiding” whilst the head of state “has a legal background”.
Acacia Mining is in dispute with the Government of Tanzania following unsupported claims of tax abuses. The government has refused to engage with Acacia, effectively forcing the hand of the firm’s major shareholder, Barrick Gold, to make an offer to buy-out minorities of its listed subsidiary in order to resolve the tax dispute.
Vedanta is contesting an application to liquidate KCM by none other than one of KCM’s shareholders – ZCCM-IH, a state-owned company. The matter, which is due for the Lusaka High Court on June 4, will see Vedanta argue ZCCM-IH misused legal process in order to launch the winding-up motion, the provenance of which is obscure.
Richard Musukwa, Zambia mines minister, said in a statement that KCM had fallen foul of various environmental and financial regulation rules. He didn’t provide details.
However, head of Vedanta Zinc Corporation, and the former interim CEO of KCM, Deshnee Naidoo, said the Zambian government had not provided any environmental breach notifications prior to the emergence of the provisional liquidation application on May 21.
Vedanta had also been “pleasantly surprised” earlier in the year regarding discussions with the Zambia Revenue Authority (ZAR) regarding VAT refunds to KCM which currently stand at $180m and, if paid, would mean KCM would be profitable, said Naidoo.
There had even been a meeting between Zambia president, Edgar Lungu, and Vedanta regarding the fiscal regime in the country which had been complicated in 2018 after the government approved increases in export taxes and duties. “It was a cordial meeting and we agreed to update every four months,” said Venkatakrishnan.
Venkatakrishnan said the group’s chairman, Anil Agarwal, was standing by on short notice for a meeting with Edgar Lungu, the Zambian president, if a meeting could be convened in resolution of the dispute.
FLOODING
Time is running short as the assets contained in KCM include the Konkola mine which Venkatakrishnan declared “the wettest mine in the world” owing to the significant water ingress. So pronounced is the threat of flooding that employees have to be evacuated within 45 minutes of stopping pumping, said Naidoo.
“The mine pumps 360 million litres of water a day,” said Venkatakrishnan. “Keeping the pump chamber operating is a critical requirement given the quantity of water.” Pumping costs total $6m to $7m per month to dewater Konkola and the nearby Nchanga pit. The mine was currently “cut off” and “choked”, he said.
Vedanta has not been allowed access to its mining facilities – which is not producing copper either from the pit or underground – whilst access to employees has been largely prohibited. Venkatakrishnan held a teleconference with Chris Sheppard, the recently appointed CEO of KCM, but requests for contact with other employees, or for access to KCM’s offices in Lusaka, had been denied.
The clamp-down on access, communication and even the movement of KCM ex-patriot employees through Zambia’s border sketches a similar scenario to that experienced by the Acacia Mining in its dispute with the Tanzanian government.
SALE
Vedanta said in an earlier media release that it had been assured by the Government of Zambia that it had not entered into any sale agreements with other parties amid efforts to resolve the liquidation proceedings.
This followed reports that mining firms Eurasian Resources Group (ERG) and China Non-Ferrous Metals Company had expressed interest in buying KCM in the event that it fell out of the hands of Vedanta. “Vedanta has indicated its desire for further dialogue and remains open to further engagement,” the company said.
For its part, ERG said that it had “… no interest, nor has it ever had an interest, in acquiring KCM and we have made no approach to government”.
Vedanta also announced that it had applied for a rejoinder to the provisional liquidation proceedings following the ex parte legal process ZCCM-IH had kicked into motion – process that the Indian firm said was contrary to the KCM shareholders’ agreement.
As a result, the Lusaka High Court will hear a third legal action in which Vedanta has disputed the provisional winding-up application by ZCCM-IH and its failure to resolve any of its own disputes through arbitration. “The dispute resolution process will also address the damage caused to KCM’s business by the institution of the winding up proceedings and the loss which Vedanta may suffer from ZCCM’s breach,” said Vedanta.
