Maravi

Govt will lose control of mining activities - Dr Chigunta

Govt will lose control of mining activities - Dr Chigunta
By Joan Chirwa and Chibaula Silwamba
Tuesday July 24, 2007 [04:00]

UNZA development studies lecturer Dr Francis Chigunta has said government would completely lose its control of mining activities if Vedanta Resources is given an additional 28.4 per cent shares in Konkola Copper Mines (KCM). And University of Zambia (UNZA) School of mines lecturer Professor Imasiku Nyambe has opposed Vedanta Resources’ plans to take 28.4 per cent more shares in KCM and suggested that the shares be floated on the Lusaka Stock Exchange (LuSE) for Zambians to buy.

Vedanta Resources Plc, which currently holds 51 per cent shares in KCM, is likely to increase its shareholding in the mining company by a further 28.4 per cent following the closure of arbitration proceedings with Zambia Copper Investments (ZCI).

But Dr Chigunta in an interview said allowing Vedanta Resources to take over an additional 28.4 per cent shareholding currently held by ZCI would defeat the purpose of citizen’s economic empowerment embarked upon by the government.

“Zambia should try and learn from what other countries have done with their natural resources to be where they are today, for example South Africa,” Dr Chigunta said.
“We are now talking about economically empowering Zambians but I doubt if we the Zambians are going to be empowered if we continue to leave every operation in the hands of foreign investors.”

Dr Chigunta said there were still a number of issues surrounding the mining industry in Zambia such as the revision of development agreements, mineral royalties as well as proposals for the implementation of a windfall tax on mining companies in the country.

“It is going to be catastrophic economically, socially and politically if the government goes ahead to allow Vedanta Resources take over 28.4 per cent held by ZCI. As a country, all we need is self-esteem in terms of driving the economic performance,” Dr Chigunta said. “Development is a homegrown process. We should not expect foreigners to deliver better services for us. This is all confirming the beggar-mentality that we have as a country.”

Dr Chigunta further advised that Zambia should amass knowledge on how to transform natural resources economically.
“We have a lot of copper and that is why huge mining companies want to invest. As a country, we should utilise this opportunity to transform our own economy. This is the reason why we will not stop asking for higher mineral royalties and windfall taxes on mining companies,” Dr Chigunta said.

“We seem to be proud of asking for dollars from other countries to run our own country when we have the resources which can give us a lot of money to finance, for example, the national budgets.”

And Prof Nyambe suggested that instead of ZCI giving the shares to Vedanta Resources, it should sell them to Zambians.
“For me that is a thing that can benefit us as Zambians,” Prof Nyambe said. “Some Zambians have got money but perhaps we don’t have the know-how of putting the mine in the mining industry.”

“If shares were floated on LuSE, you will see many Zambians coming to buy shares. Even Zambians with little amounts can buy shares little by little.”
He said once Vedanta was left to get more shares it would have monopoly in decision-making on the operation and corporate responsibility of KCM.
“Vedanta already has 51 per cent in KCM and if it gets more shares that will mean that it will be doing things on its own without opposition. It’s like in Parliament, a party with more members has majority votes,” said Prof Nyambe.

And economic consultant Professor Oliver Saasa said the government must still maintain a sizeable amount of shares in KCM.
“It will not be good for Vedanta to have a larger share of KCM, although it is almost evident that they (Vedanta) will get an additional 28.4 per cent in KCM,” Prof Saasa said. “This is an extremely dicey situation. I feel very uncomfortable that Vedanta should have more shares in KCM.”

ZCI, through its investment bank Rand Merchant Bank stated that Vedanta would exercise its option to purchase the shares once re-valued.
ZCI chairman Thomas Kamwendo, in his letter to shareholders, said the board was highly involved in the negotiations with Vedanta resulting from the exercise of its call option in terms of Vedanta call Option Deed over the remaining 28.4 per cent held by ZCI through ZCI Holdings SA.

Kamwendo explained that the matter was taken for arbitration as a result of a material difference of opinion in the interpretation of certain provisions relating to Vedanta’s call option Deed.
He explained to the shareholders that in the event that Vedanta was unwilling to pay the option exercise price as determined by the appointed independent investment bank, it shall not be required to proceed with the associated purchase of ZCI’s shares in KCM.

According to Vedanta’s call option deed singed after entering KCM as the government’s strategic equity partner, the resources group will have a call option over ZCI’s 28.4 per cent shares in KCM, exercisable on either a positive development decision on the Konkola Deep Mining Project or the achievement by Konkola mine, a division of KCM, of three million tones per annum of ore production for four consecutive quarters.

The KCM’s shareholding is spread out among Vedanta Resources Plc (51 per cent), ZCCM
Investments Holdings (20.6 per cent) and ZCI with 28.4 per cent.
It is a local mining company with three operating copper mines and associated processing facilities, the Nkana smelter and refinery and has also started to develop the Konkola Deep Mining Project.

Labels: KCM, MINING CONTRACTS, UNZA, VEDANTA

posted by MrK @ 3:27 AM