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 in Africa’s second-largest copper producer.
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 while delivering his ruling. The court also ruled that the Zambian government breached its shareholder obligations, and continues to do so.
“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.
Mines Minister Richard Musukwa couldn’t immediately be reached for comment and calls to government and presidential spokesmen went unanswered.
Vedanta lodged the application against Zambia’s ZCCM-IH 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.
While uncertainty may still linger for mining companies about the security of their investments in Zambia, 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.
Source: Business-Standard