THREE Vedanta Resources companies have dragged Konkola Copper Mines (KCM) Provisional Liquidator Milingo Lungu to the Lusaka High Court over plans to restructure and reorganise KCM into two separate subsidiary companies; namely KCM SmelterCo Limited and Konkola Mineral Resources Limited.
The three companies have also applied for leave to commence an action against KCM (in provisional liquidation).
Vedanta Resources Holding Limited, Vedanta Resources (Jersey II) Limited and Vedanta Resources Limited have cited Milingo and KCM as defendants, seeking a declaratory order that Milingo does not have the power or should not exercise the power to carry out the reorganisation of KCM’s business, assets and affairs in the manner announced on December 28, 2020, or at all.
They also want an order directing Milingo whether by himself, servants or agents to immediately reverse any process of reorganisation that has been undertaken with respect to KCM.
The three companies further want an order of injunction restraining Milingo whether by himself, servants or agents from undertaking any reorganisation of KCM or from transferring, disposing of, selling or dissipating the assets of KCM in any manner whatsoever and directing Milingo to reserve all the assets of the mining company until the determination of the proceedings.
The plaintiffs also want an order of injunction restraining KCM and its management or agents from undertaking or participating in any reorganisation to the detriment of Vedanta until the determination of the proceedings.
In a statement of claim filed in the Lusaka High Court commercial registry, January 14, this year, Vedanta Resources Holdings Limited stated that it was the holding company of KCM and holds 79.4 per cent of the shares in the said company, therefore, constituting it as the majority shareholder in KCM, while ZCCM-IH was a minority shareholder in KCM holding 20.6 per cent of the shares.
Vedanta Resources Limited stated that through its subsidiary, Vedanta Resources (Jersey II) Limited, it has provided significant loans to KCM, which includes an additional US $416,500,000 during the 12 months ended March 31, 2019, to bring the total loans due from KCM to the plaintiffs in the amount of US $1,038,300,000 as of March 31, 2019.
The plaintiffs stated that the said loans have not been repaid by KCM and remain outstanding to-date.
The three companies stated that on December 28, 2020, Milingo caused to be issued what was referred to as a management brief to employees of KCM in which a proposed reorganisation of KCM was announced and described.
They stated that under the proposed reorganisation, Milingo proposes to restructure and reorganise KCM by transferring the whole of its business and assets to two separate entities.
“The proposed reorganisation of KCM will involve the transfer of the process business units to a separate company called KCM SmelterCo Limited (Smelterco) and the mining business units will be transferred to a separate company called Konkola Mineral Resources Limited. The large-scale mining licences and the mineral processing licence will be transferred as part of the reorganisation,” read the claim.
The trio stated that the effect of the reorganisation would be to hollow out KCM completely and transfer all of its assets into Smelterco and Konkola Mineral Resources Limited (KMRL).
They added that this would remove the business and assets of KCM, which is a company in provisional liquidation from the custody and control of Milingo Lungu and into the custody and control of boards of directors of SmelterCo and KMRL, respectively.
Vedanta Resources companies stated that that insofar as they were aware, the proposed reorganisation had not been sanctioned by any order of the court, nor had it been approved by the security trustee or the shareholders of KCM.
They stated that the reorganisation was designed to facilitate the sale of the business and assets of KCM to a third-party in a way that could not be achieved by Milingo within his powers and without the scrutiny or supervision of the Court.
The three companies added that Milingo was prohibited by law from transferring or disposing of any assets of KCM by reorganisation or otherwise without the authority of the Court.
The plaintiffs lamented that they would continue to suffer loss and damage resulting from Milingo and KCM’s proposed actions.