Zambia ramps up war of words with mining company Vedanta

The government of Zambia has launched a blistering attack on mining company Vedanta, accusing it of breaking the law and reneging on investment promises.

Zambia has been locked in a bitter dispute with the group, which is controlled by Indian metals tycoon Anil Agarwal, since May 2019 when the government seized control of Konkola Copper Mines, which is majority owned by Vedanta.

It has accused the company of breaching the terms of its mining licence, a charge Vedanta denies and is fighting through international arbitration.

The public row has intensified industry worries about the investment climate in Africa. Glencore and First Quantum Minerals also operate in the country.

At an industry conference on Wednesday, Richard Musukwa, Zambia’s minister of mines and mineral development, said Vedanta had promised to invest hundreds of millions of dollars in KCM but had not done so.

“In the case of KCM . . . the government of Zambia was dealing with a company, an investor that broke the law,” Mr Musukwa told the annual Investment in Africa Mining Indaba.

“Vedanta Resources pledged to put $398m in a project and didn’t bring that money. It pledged another $500m — it did not bring that. It pledged another $250m — they did not bring that money.”

In a statement, Vedanta responded: “The minister has alleged that Vedanta has broken the law but has neither provided any specifics nor has he pursued any legal remedies. The company denies absolutely any suggestion that it broke any Zambian law.”

Vedanta also challenged Mr Musukwa’s assertion that it has reneged on investment pledges.

“Not only is the assertion incorrect, but were Vedanta to have been in breach of promises, the remedy would have been to begin the approved dispute resolution procedures under the KCM Shareholders Agreement.”

It also said Mr Musukwa’s claim that KCM had not produced any copper since 2014 was “bewildering” because average mined metal production to the end of April 2019 was 104,800 tonnes per annum.

KCM is 79.4 per cent owned by Vedanta with the rest controlled by state company Zambia Consolidated Copper Mines Investment Holdings.

Soon after the government seized control of the mine last year, it said it had interested buyers including Turkish and Chinese companies and was looking for a quick sale. But lawyers have said that the threat of legal action by Vedanta has put off bidders.

Even if Vedanta eventually wins in arbitration, observers have said that a good relationship with the government is crucial to running the mine, which is one of Zambia’s biggest private employers and is difficult to operate.

One problem is that Konkola is a “wet” mine and must pump out huge volumes of water each day to stay operational. At the same time, Zambia’s power grid, which is heavily dependent on hydro electricity, has become increasingly unreliable because of a prolonged drought.

“We have said since May 2019, that our preference would be to resolve this matter amicably, through direct engagement with the government of Zambia, in a manner which would ensure Vedanta’s return to KCM,” the company said.