THE provisional liquidator managing Konkola Copper Mines (KCM) was continuing to seek opportunities to sell the assets, said Vedanta Resources.
In an update on legal proceedings in which Vedanta is hoping to regain control of KCM, in which it has a 79.4% stake, the group cautioned potential buyers of the company’s mines that they might be breaking the law.
“It has come to Vedanta’s attention that the provisional liquidator appears to be in discussions seeking to dispose of further KCM assets,” Vedanta said. “In each instance, Vedanta will seek the required court action and cautions any parties interested in acquiring these assets that they may be doing so unlawfully.”
The Zambian government put KCM into provisional liquidation last year on the basis that Vedanta broke promises by failing to pay dividends among other claims. The government has a 20.6% stake in KCM through ZCCM-IH.
In November, Vedanta won an injunction from the Lusaka High Court preventing Moxico from buying KCM’s Mimbula, an open cast resource near Chingola. Moxico, which is listed in the UK and run by former Rio Tinto executive, Alan Davies, had offered $20m for the asset in a transaction approved by Milingo Lungu, the provisional liquidator.
The attempted sale of Mimbula to Moxico supports suspicions that the Zambian government is merely expropriating KCM, which produces about 100,000 tons a year of copper concentrate, ahead of selling it to a third party.
Vedanta said it wanted to continue with an arbitration process as set out in the KCM shareholders’ agreement. The South African High Court issued Vedanta an injunction in support of arbitration and ordered the provisional liquidator to stop KCM’s winding up process.
“Neither ZCCM-IH nor the provisional liquidator have thus far complied with that injunction,” said Vedanta which added it hoped to settle the matter through “… dialogue and constructive engagement” with the government, the legal actions notwithstanding.
Whilst Vedanta’s legal proceedings are yielding little result, Zambia is negotiating a loan deal with the International Monetary Fund (IMF) which could be affected by how certain domestic matters are dealt with.
Already, the IMF has held back on further disbursements of some $1.7bn agreed with the Congo Republic because the central African country has failed to renegotiate oil supply deals with Swiss firms Glencore and Trafigura, according to a report by Bloomberg News.
Zambia’s economy was said to be “imploding”; yet despite this, the country’s president, Edgar Lungu, was putting his political survival ahead of other priorities, said Bloomberg News in a report last year.
“Inflation near 11% has been accelerating for eight months and is well above target. The kwacha is the world’s fourth-worst performing currency this year. Daily power cuts last 18 hours after a drought drained hydroelectric dams, and there’s not enough money to import more energy,” the newswire said.
“There isn’t a likelihood of an IMF program anytime soon. To me that implies the government is not willing to put forward the policy reforms needed to correct the fiscal path,” Yvonne Mhango, a sub-Saharan Africa economist at Renaissance Capital, told Bloomberg News.
“It doesn’t look like they will be able to pull themselves back from the brink.”