VEDANTA Resources expressed dismay at a High Court decision in Lusaka today in which the judge rejected the firm’s application to be joined to liquidation proceedings of Konkola Copper Mines (KCM), the Zambian copper producer the Indian firm controls.
“The Zambian government has unfairly tried to exclude Vedanta from decisions about KCM’s future,” the group said in an announcement. “It cannot be right for ZCCM [-IH] … to pursue this process without the majority shareholder being heard,” it added.
Vedanta said it was also “displeased” that ZCCM-IH had been allowed to modify its original winding up petition, again on an ex-parte basis. Ex-parte describes a decision by a judge in which all affected parties are not present. In this case, Vedanta has been excluded from the winding-up proceedings
ZCCM-IH, a government-owned company, has a 20.6% stake in KCM. In May, it emerged that the Zambian firm wanted to liquidate KCM. Whilst KCM has been operating at a loss, the motive behind the winding-up order relate to alleged subversions of Zambia law, according to comments made by Zambia’s mines minister, Richard Musukwa.
The judge’s decision would appear to justfiy the high confidence expressed by Zambia’s president, Edgar Lungu earlier today when he told Bloomberg News on the sidelines of a conference that the country would have a buyer for the KCM assets – which includes the Konkola mine – lined up in the course of July.
“I think it’s going on very well,” said Lungu of the potential sales process. “By the end of this month, towards the midway next month, we should wrap up in terms of talking to the would-be investors,” he told the newswire. Vedanta took a dim view of the comments.
Said Vedanta: “Reports that President Lungu has said he expects talks with potential buyers of KCM to conclude within a month are deeply worrying. They imply that a decision to sell the assets was taken in advance of any Court ruling and without Vedanta being given the opportunity to be heard”.
“KCM is not for sale and Vedanta will challenge any attempt to sell the business without its consent,” it said, adding that it had been given leave to appeal the High Court’s decision. The group would also take “… urgent alternative steps against ZCCM’s winding-up petition” said Vedanta.
“As previously been stated, ZCCM’s actions are a breach of the KCM shareholder agreement which requires a process of engagement on any disputes between the shareholders and, failing agreement, resort to international arbitration in Johannesburg,” it said.
There are concerns regarding the operational status of Konkola mine which pumps some 360 million litres of water a day and would flood within 45 minutes were dewatering to be halted, for whatever reason. Liquidation proceedings, and the removal of Vedanta managers seconded to KCM, imperilled the assets, the firm said. Winding up orders were also prejudicial to creditors, and would impact jobs, it added.
“There are no just or equitable grounds to wind up KCM,” said Vedanta. “The company directors appointed by ZCCM approved its financial statements on a going concern basis in early May this year,” the company said.