Diversified miner Vedanta Resources says it remains open to dialogue with the Zambian government regarding the future of its Konkola Copper Mines (KCM) subsidiary.
This follows the recent appointment of Milingo Lungu of Lungu Simwanza & Company as provisional liquidator of KCM, putting him in charge of the day-to-day running of the subsidiary.
“We hope to meet with the Zambian government in the near future to discuss a mutually agreeable solution to the current situation, as well as the broader challenges faced by KCM. The sooner we resolve the uncertainty around the business, the sooner we can return it to a sustainable footing,” Vedanta CEO Srinivasan Venkatakrishnan said in a statement on Monday.
Vedanta expressed concern about what the appointment of a provisional liquidator meant for its people in Zambia, the communities near its operations and the future of its business in the country.
The appointment of a provisional liquidator had followed after State-owned ZCCM Investments Holdings (ZCCM-IH), a 20.1% shareholder in KCM, last week obtained an order from the court for the winding up of KCM and the appointment of a provisional liquidator.
ZCCM-IH’s application for the winding up of KCM was on the basis of fairness and equity rather than on grounds of insolvency, Vedanta said, stating that it was a misuse of Zambia’s corporate law, given that the parties had agreed to a specific dispute mechanism in their shareholders’ agreement.
Vedanta stated that neither it nor KCM had been notified of the application and, accordingly, neither had an opportunity to participate in the hearing.
Vedanta indicated that it strongly opposed both the appointment of the provisional liquidator and the winding up of KCM.
Vedanta has since filed a court application to join the proceedings and has been granted permission to do so. The matter will be heard on June 4.
Vedanta has invested $3-billion in Zambia since 2004.
This included building one of the largest shafts in Africa to allow underground mining at Konkola, the construction of a new smelter at Nchanga, the construction of two new concentrators and exploration that increased the gross resource base by 214-million tonnes, the company highlighted.
The company indicated that its investment created considerable benefits for local communities and the nation, adding that employment at KCM had increased threefold under its ownership, with 13 000 people now working at KCM.
The company contributed about $1.3-billion to the national exchequer over that period and almost all surplus cash was reinvested in the business, Vedanta pointed out.
The company said these considerable financial and social investments combined with exponential rises in taxes, duties, fuel and power costs have placed an enormous and unaffordable burden on the company.
It added that the most recent restrictions, that is, a new tax code implemented in January, and duty on concentrates had negatively impacted on the running of the smelter and the much-needed acid to run its operations.
Moreover, it noted that the Zambian government owed KCM more than $180-million in value-added tax refunds, which exacerbated KCM’s financial position.