Vedanta Resources is providing an update on the current situation affecting its Konkola Copper Mines (KCM) operations in Zambia.
Vedanta confirms that it is seeking to formally challenge the decision of the Lusaka High Court to grant an ex parte order appointing a provisional liquidator for KCM.
The liquidation application was brought against KCM by ZCCM-IH.
While Vedanta intends to fully defend its legal rights, Vedanta calls for the Government of Zambia to meet with Vedanta to come to a mutually agreeable solution to the current situation.
Vedanta’s legal representatives in Zambia yesterday served papers notifying ZCCM- IH, KCM and the KCM provisional liquidator of its intention to apply to be joined as a party to the hearing by Justice A.M. Banda-Bobo in the Lusaka High Court on Friday 24 May 2019.
The application to be enjoined is a critical step in the process so that Vedanta may file and receive documents relating to the proceedings.
Vedanta has serious concerns about the intentions of the applicants and the procedures that were followed by ZCCM-IH as a representative of government to obtain a provisional liquidation order on an ex parte basis against KCM in an apparent misuse of the legal process to date.
The company is relying on the protection of its rights under Zambian law and international norms.
Concerns include the following:
- The ZCCM-IH petition for winding-up of KCM under the Corporate Insolvency Act
deals with a broad range of issues relating to KCM not all related to the solvency of
- ZCCM-IH is not a major creditor of KCM.
- ZCCM-IH and the Zambian government are represented on the KCM board, were
fully apprised of, and party to the circumstances of the company and major decisions
that were taken to manage KCM.
- The provisional liquidation order was granted ex-parte, that is, without Vedanta, the
majority shareholder, being present and able to present its case.
- Vedanta’s application for an ex parte order to be enjoined in the liquidation hearing
was rejected by Justice A.M. Banda-Bobo on the basis that this could only be considered inter partes (that is, with the other parties being ZCCM-IH and KCM, represented by the provisional liquidator, being present).
- The powers granted to the provisional liquidator by the Lusaka High Court most closely resemble those that would be granted to a liquidator on the final winding up of a business.
In light of the most recent events, where a number of expatriate employees and contractors have been prevented from leaving the country, Vedanta calls for the Government of Zambia to ensure the unhindered passage of all employees or contractors to KCM inside, and into and out of the country.
Vedanta is a long-standing, loyal investor in KCM and in Zambia having invested over US$3 billion since the acquisition of the asset in 2004.
This has extended the gross resource base by 214 million tonnes, included the commissioning of the Konkola deep mining project as well as several studies into projects that could further extend the mine life and increase production.
The company employs nearly 13,000 people at its sites and operates clinics, hospitals and schools through its corporate social responsibility programme that amounts to over US$210 million since the acquisition.
KCM has contributed c.US$1.3 billion to the Zambian Exchequer in that period and continues to be the leading Pay As You Earn contributor in the country. For the year ended 31 March 2019, Vedanta provided KCM with financial support (including funding of loan repayments) of approximately US$500 million.
These significant 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.
The most recent restrictions and duty on concentrates have negatively impacted the running of the smelter and the much-needed acid to run its operations.
In addition, the Zambian government owes the company more than US$180 million in VAT refunds which has made the situation even more challenging