India ( Common Wealth): Zambia has decided to hand back control of Konkola Copper Mines (KCM) to Vedanta Resources, mines minister Paul Kabuswe announced on Tuesday, putting an end to a dispute over ownership of the properties that flared in 2019 when authorities seized the mines.
According to Kabuswe, the government, which has a 20% share in KCM through ZCCM-IH, would allow Vedanta to restore ownership and operation of KCM’s mines and smelter after the business repeated a vow to invest more than $1.2 billion to enhance output and cover outstanding debts.
Kabuswe noted that a shareholders’ agreement is being revised to make the promises of both shareholders legally binding. The minister stated that the formal details of the agreement and the reinstatement of the KCM board would be finalized over the next three months.
Former President Edgar Lungu’s government organized the seizure of KCM assets and forced liquidation in May 2019, accusing the Indian business of failing to meet plans to invest in boosting mining output.
The forceful acquisition nearly paralyzed KCM operations and caused protracted legal fights, with Vedanta mounting legal battles, including an arbitration court in London, to regain the copper assets.
It is no secret that the asset has deteriorated significantly, and manufacturing output has been significantly reduced,” Kabuswe told media. This is a really unfortunate event for the country’s national strategic asset.
After both sides abandoned judicial challenges in favor of discussions, the deal was reached amicably. The agreement could indicate that Zambian President Hakainde Hichilema is fulfilling some of his goals to reduce the state’s participation in the mining industry.
The government is looking for a new investor at Mopani Copper Mines as it seeks to quadruple copper output over the next decade. Much of the $1 billion offered by Vedanta is likely to be used to advance the Konkola Deep Mining Project, an underground operation that has suffered from a lack of investment despite possessing one of the world’s greatest copper reserves.
Underground operations are practically suspended, and KCM urgently requires capitalization. Kabuswe explained. In addition to committing to a $1 billion investment over the next five years, Vedanta stated in a separate statement that it will pay $250 million to local creditors, spend $20 million on community projects, and raise employee compensation by 20%.
The Konkola Deep mine contains around 250 million tons of copper ore reserves, and “Zambia and the world have been waiting for a long time for this mine to be properly developed,” according to ZCCM.
The mines were nationalized in the early 1970s. The government’s ownership of the mines was changed multiple times during the next 20 years. Zambia became a multi-party state in 1991, and the government began privatizing parastatal enterprises, notably those in the mining industry. The privatization of the main mining assets was completed by March 2000. Anglo American repurchased a 51% share in Konkola Copper Mines, which included mining operations in Chingola and Chililabombwe, as well as smelting and refining activities in Kitwe. However, Anglo American withdrew as a shareholder in KCM in September 2002, leaving a reformed corporation whose main shareholders were once again government entities, ZCCM-IH and ZCI.
With a 51% stake in KCM, Vedanta Resources became the company’s largest stakeholder in November 2004. I Vedanta Resources increased their stake in the company to 79.4% in 2008. Vedanta has invested nearly US$ 3 billion since its initial acquisition to modernize equipment, create new facilities, and expand capacity. The investments have increased the mines’ life by more than 25 years.
ZCCM-IH, a Lusaka and Euronext listed business with 87.6% owned by the Zambian government and 12.4% controlled by public shareholders, owns the remaining 20.6% of the business. The Republic of Zambia’s government owns a gold stake.
