THREE shareholders of Konkola Copper Mines Limited (in liquidation) have sued the provisional liquidator Milingo Lungu over his decision to reorganise the mines by transferring the whole of its business and assets into two separate entities.
Vedanta Resources Holding Limited, Vedanta Resources (Jersey II) Limited, and Vedanta Resources Limited have sued Lungu in his personal capacity as provisional liquidator of KCM.
The plaintiffs argue that Lungu has no authority to reorganise the business, assets and affairs of KCM in the manner proposed.
They said Lungu’s action counters his primary functions and duties as provisional liquidator, to protect and preserve the assets of the company pending determination of the winding up proceedings.
In an affidavit in support of ex-parte summons for leave to commence an action against the respondent, the plaintiffs want a declaratory order of the Lusaka High Court that Lungu does not have the power or should not exercise the power to carry out the reorganisation of KCM business, assets and affairs in the manner announced on December 28, 2020.
In a statement of claim filed in the High Court commercial registry, the Vedanta Group said KCM holds three large scale mining licenses and a mineral processing license.
They said by virtue of this, the group is duly authorised to undertake mining operations and operate its mines at Chingola and Chililabombwe on the Copperbelt.
The group submitted that KCM mines copper at its Nchanga open pit mine and operates a copper smelter in Chingola.
Vedanta Resources Limited said through its subsidiary KCM has provided significant loans to KCM which includes an additional US $416,500,000 during the 12 months ended March 31, 2019.
Vedanta said the total loans due from the mining firm to the shareholders stood at over US $1 billion.
The said loans have not been repaid by KCM and remain outstanding to date.
“By a common terms of agreement dated October 31, 2012 entered into between KCM as borrower, the Standard Bank of South Africa Limited and various lenders agreed to provide to KCM loan facilities in the aggregate amount of US $700,000,000 subsequently increased to US $ 820,000,000 on the terms and conditions set out in the common terms agreement and the facilities,” the plaintiffs said. “The common terms agreement and the facilities were secured by fixed and floating charges and the security assignments over the assets of KCM including a fixed charge over equipment dated October 31, 2012 and a floating charge over all present and future undertaking and movable assets dated October 31,2012. Standard Bank acts as the security trustee in respect of the security.”
Vedanta explained that KCM failed to meet all or some of its obligations to the finance parties and that between June 28, 2019 and July 20, 2020 it paid in total a sum of US $120,400,000 pursuant to the demand guarantee.
It said it has the right to be indemnified by KCM as it is a secured creditor of the mining company in the sum of $120,400,000.
The shareholders of KCM said the proposed reorganisation of their company has not been sanctioned by any order of the court neither has it been approved by the security trustee or the shareholders of the mining company.
The plaintiffs said the proposed reorganisation is bad conduct by the provisional liquidator because it comes after the Court of Appeal judgment dated November 20, 2020 when it suspended the winding up proceedings of KCM.
The Vedanta Group of companies said Lungu as an officer of the court must act in good faith and should not do or seem to do anything which undermines the court or make the court appear impotent.