COUNTRY IN FOCUS
COUNTRY IN FOCUS
the two parties. Vedanta holds a 19.4% interest in KCM. In response to the
accusations made by ZCCM in May 2019, Vedanta contends that the state-owned
mining company was in breach of a shareholder agreement after it sought an ex
parte order from the Lusaka High Court to initiate a winding-up process. ZCCM
issued a winding up petition, but it remains stayed pending the hearing on the
appeals of both Vendanta and ZCCM.
Earlier Vedanta Resources applied to the South African High Court to grant an
application for an injunction in support of an arbitration agreement. It was granted by
the South African High Court and it also issued an order for the winding up of KCM be
withdrawn. The ZCCM and the provincial liquidator did not heed this injunction. At the
same time, the Zambian government indicated that they would appoint a liquidator to
operate KCM in the interim.
In November 2019 KCM’s run of bad luck continued when the smelter was forced to
shut down two days earlier than planned for scheduled maintenance, after a sulphur
dioxide leak was discovered at the Nchanga smelter.
In the most recent development, KCM was placed in liquidation, but the Zambian High
Court in November 2019 issued an order, restricting the sale of the Mimbula mining
rights. At the time of writing this piece, the hearings were still in progress. It appears,
nonetheless, that the Zambian government’s main aim is to appoint a new owner for
KCM, with a number of Chinese companies in the running. This move could, of course,
be disastrous and widen the trust deficit between government and the private sector
further. But government’s gripe with international mining companies doesn’t stop at
Agarwal’s front gate. In the past few years, it has taken on other international giants
like Canadian-based First Quantum Minerals. At times, First Quantum and ZCCM’s love-
hate relationship has boiled over and, on a few occasions, threatened to derail the frail
confidence of international investors, which are so important to building a sustainable
mining industry in Zambia.
First Quantum recently initiated arbitration proceeding against ZCCM. This followed a
criminal complaint made by the government entity for the alleged unauthorised transfer
of money by First Quantum’s Kansanshi Mining to the company’s local subsidiary.
It was alleged that a transfer was made between Kansanshi, which is 80% owned by
First Quantum and 20% owned by ZCCM to Kansanshi Holdings. Kansanshi Holdings
intended to appeal for arbitration over the dispute, with the arbitration case being
heard in London. This follows on the dispute that First Quantum had with the Zambian
government in 2018, after being handed a USD5.8-billion bill for unpaid import duties.
More woes for mining
First Quantum, however, appears to remain optimistic about operating in Zambia.
The company mulled an investment of about USD1-billion to lift output, increase the
life of mine and halt production declines at Kansanshi. This move will increase annual
production to 300 000t from a previous estimate of 235 000t. It is considered highly
unlikely, though, that the ambitious plan would be approved by the board, barring
significant changes to Zambia's tax regime and the fact that Chinese company Jiangxi
Copper recently bought an indirect stake in First Quantum Minerals.
The troubled copper and cobalt sector in Zambia suffered another blow in January
2020 as Eurasia Resources Group’s (ERG) Africa unit, announced the suspension of
its operations at Chambishi Metals due to an acute shortage of copper and cobalt
concentrates required to produce cathode. ERG indicated that they will be placing
the plant in care-and-maintenance, if insufficient feedstocks could not be obtained
in Zambia. If the situation continues, upward of 200 jobs may be lost. This is mainly
due to the introduction of a 5% import tax on raw materials. This severely impacted
on the import of concentrate material from mines located in the Democratic
Republic of the Congo (DRC).
ERG’s announcement follows reports that the battery mineral market is likely to remain
depressed in 2020. The Electric Vehicle (EV) battery market has also changed in the last
two years, with buying of metals being more sporadic and mines struggling to obtain
long-term offtake agreements. The project result of this trend is that mines, like the
ones operating in Zambia, would be subject to periods of intermitted shutdowns.
In the meantime, ZCCM has incorporated a new mining company called ZCCM Gold
Company (ZCCM Gold) which is 51% owned by ZCCM and 49% by the Zambian
20
African Mining March 2020
20
African Mining March 2020
www. africanmining.co.za