In a last attempt to evade liquidation of its mining business in Zambia, Mining tycoon Anil Agarwal's Vedanta Resources will do another round of reconciliatory meeting with Zambian President Edgar Chagwa Lungu this week in India. Vedanta is on the verge of losing the lucrative copper mines in Zambia - Konkola Copper Mines (KCM) for allegedly defaulting on tax payments and violating operational licence. In May, the Zambian high court appointed a provisional liquidator to dissolve the company, but the High Court in Johannesburg, which is the seat of international arbitration in Africa, has ordered to halt any sell-off of KCM assets.
Vedanta official told Business Today that the company executives would meet the Zambian President Edgar Chagwa Lungu this week, for the second time in a month. Agarwal had an unsuccessful meeting with the president Lungu in Lusaka, Zambia about week back, but the latter stood firm with his decision to dissolve KCM. Since Zambia is Africa's second biggest copper-producing country after Democratic Republic of Congo, President Lungu targets to enhance the tax revenue from global mining giants working there to repay the country's growing domestic and international debts.
Konkola Copper Mines (KCM) is a leading integrated copper producer in Zambia and operates one of the two mines producing electro-refined copper cathode in the region. Much of the product is exported mainly to South East Asia, China and the Middle East. The refined cathode is also sold to local cable manufacturers.
According to Vedanta official, the company remains committed to resolving the issue amicably through discussion and engagement with the government of Zambia. It is also clear that the company will use all available legal avenues to defend its rights as the majority shareholder in KCM, he said. Legal avenues include opposing the winding up proceedings brought in the Zambian courts, and beginning arbitration in South Africa. Vedanta and its minority partner - the Zambian government-owned ZCCM Investments Holdings - in KCM had earlier agreed to resolve the disputes through arbitration in South Africa.
"Vedanta is clear that KCM has not violated its licence conditions. It also received no warning of these alleged breaches before the minority shareholder brought ex parte liquidation proceedings against it. As regards to the allegations of unpaid taxes, Vedanta contends that the Zambia Revenue Authority owed KCM (as of May 2019) over $180 million in unpaid VAT Refunds," said Vedanta official in an email response. Vedanta has begun the formalities of the arbitration process, but hearings have not yet commenced.
Vedanta official said the company believes that the meeting in Lusaka last week provided a solid base for further discussions with the Government of Zambia on the future of KCM. "Vedanta looks forward to engaging further with President Lungu and his team in India this week," he said. The minority shareholder in KCM, ZCCM-IH, initiated the application for the liquidation of KCM. ZCCM-IH represents the Zambian government's investment interests in the country's mining industry. At all times, ZCCM-IH has had their representatives on the board of KCM and has been kept fully appraised, said the official.
Vedanta has enabled investment of over $3 billion in KCM since first investing in 2004. "KCM has also contributed over $2.3 billion in employee earnings, over $1.3 billion in power costs, over $5.3 billion in other operating costs and almost $737 million in taxes, royalties and levies. KCM has also spent over $200 million in community-related activities and CSR spend," said the official.
The mined metal production from KCM stood at 91,000 tonnes in 2017/18, about 3 per cent lower. The revenue increased by 47 per cent to $1.3 billion in 2017/18, while earnings before interest, tax, depreciation and amoratisation (EBITDA) increased to $73 million from $6 million. The holding company of the group, Vedanta Resources, has given a corporate guarantee to KCM for an amount of $689 million in 2017/18 and $709 million in 2016/17.