South African Court Blocks Zambia’s Plans to Sell Vedanta Mines
Ruling a blow to the Zambian government, which has said it plans to sell Konkola Copper Mines to another foreign investor.
(Bloomberg) -- A South African court ordered Zambia to halt plans to liquidate and sell copper mines controlled by Indian billionaire Anil Agarwal pending arbitration in a dispute that’s rattled investors. The Zambian government said it would appeal the ruling.
The Zambian government must immediately cease efforts aimed at winding up Vedanta Resources Ltd.’s Konkola Copper Mines unit, Johannesburg High Court Judge Leicester Adams said. The court also ruled the state breached its shareholder obligations, and continues to do so. The South African court has no jurisdiction in Zambia and the ruling isn’t enforceable in the nation, Zambian Mines Minister Richard Musukwa said in comments broadcast on Facebook.
“Pending any further determination of the arbitration, the first respondent is interdicted and restrained from taking any further steps in the furtherance and prosecution of winding-up proceedings,” Adams said on Tuesday.
Vedanta had approached the South African court due to an agreement that selected Johannesburg as the seat of arbitration in the event of a dispute.
“It has no effect on the processes that are going on in Zambia,” Musukwa said of the ruling. “The liquidator who was actually given the mandate by the Zambian court is still in charge of the liquidation process at KCM.”
Vedanta lodged the application against Zambia’s ZCCM Investments Holdings Plc, which owns a 20% stake in KCM, as it battles to stop the liquidation and planned disposals of its copper mines in the country.
In May, Zambia’s government began liquidation proceedings against KCM after accusing Vedanta of lying about expansion plans and paying too little tax. The company says it is a “loyal investor” that’s spent more than $3 billion in the country since 2004.
The ruling is a blow to the Zambian government, which has said it plans to sell KCM to another foreign investor. Companies including China Non-Ferrous Metals Co. have expressed an interest in buying the asset.
The Zambian government has instructed its lawyers in South Africa to appeal the High Court ruling, Justice Minister Given Lubinda said in comments on Facebook. Attorney-General Likando Kalaluka will “express to the court in South Africa the fact that Zambia has a viable and working and functioning judicial system,” he said.
Kalaluka “will actually be going into South Africa with the purpose of protecting the integrity of the judiciary in Zambia,” said Lubinda. “This is a matter that also the minister of foreign affairs will be taking up with his counterpart, the minister of foreign affairs for South Africa, so that this matter is also handled administratively.”
While uncertainty may still linger for mining companies about the security of their investments in Africa’s second-largest copper producer, Musukwa has said the dispute with Vedanta is “an isolated case” that should not be used to damage the southern African nation’s image.
The seizure has spooked investors, with yields on Zambia’s Eurobonds due in September 2022 surging to a record 22.1% at the end of May. The dispute has also weighed on the shares of other mining companies with operations in Zambia, including Canada-based First Quantum Minerals Ltd. and Gemfields Group Ltd.
--With assistance from Taonga Clifford Mitimingi and Matthew Hill.
To contact the reporter on this story: Felix Njini in Johannesburg at fnjini@bloomberg.net
To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Hilton Shone, Paul Richardson
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