Zambia plans sale of copper mines owned by billionaire Anil Agarwal

Zambia’s intend to sell the copper mines it seized this past year from billionaire Anil Agarwal’s Vedanta Resources is bogged down in legal challenges that are discouraging buyers.

Arbitration between Vedanta and Zambia will proceed in London in January, after the government alleged the business lied about expansion plans and paid inadequate tax. That leaves cash-starved Konkola Copper Mines in the hands of a court-appointed liquidator, with the chance of a protracted legal process deterring potential investors.

“Investors obviously want to know the outcome of the arbitration and the other legal cases before they proceed,” Barnaby Mulenga, everlasting secretary in Zambia’s ministry of mines, said in an interview.

Zambia’s government has more pressing priorities as it teeters on the edge of default. The nation will announce the results of an essential vote Friday that could see holders of its $3 billion in Eurobonds reject a government request for a payment holiday.

Mr Mulenga said the KCM assets have attracted interest from investors in Turkey, Russia, the UK and Canada, who jointly run KCM with state-owned ZCCM Investments Holdings. While a rally in copper helps KCM’s short-term finances, the arbitration will further delay a turnaround that could require investment greater than $1bn. The uncertainty has been compounded by the coronavirus pandemic.

“We'd hoped that the disputes in court and arbitration will be resolved quickly and that way the assets would fetch more,” said Milingo Lungu, the provisional liquidator. “Covid has also been a factor as most companies are not able to make investment decisions in these uncertain times.”

The arbitration case might not be concluded before early 2022, according to Peter Leon, somebody at Johannesburg-based Herbert Smith Freehills, who is advising Vedanta but isn’t directly mixed up in legal process.

“There is absolutely no way they are able to sell KCM to some other investor because that might be flying when confronted with litigation in Zambia and the arbitration processes,” Leon said.

Vedanta is focused on engaging with the government to get rid of the wrangle over the assets, where it’s invested more than $1.7bn, a spokesperson said. The business has denied allegations it hasn’t paid enough tax.

“This includes our commitment to financial and tech support team to KCM so that you can stabilise the current businesses and additional develop the assets,” the spokesperson said.

In the meantime, KCM’s relatively high-cost functions are languishing. Mining output is on the “low side,” with processing procedures counting on shipments of third-party copper concentrates, said Mr Mulenga, declining to provide figures.

The government may help cover some costs at KCM, which reported a loss of $332 million in the entire year through March 2019. By May, the business enterprise also owed $145m to Copperbelt Energy, in line with the power supplier.

The mounting problems at KCM also highlight the political risks posed by elections next year in Africa’s second-largest copper producer. President Edgar Lungu’s government clashed earlier this year with Glencore over the commodity giant’s intend to mothball its Mopani Copper Mines to weather the impact of the pandemic. Other copper miners have halted $2bn of planned investments as a result of a dispute over a royalty tax.