KCM starts dismantling $80mn debt by paying local contractors

Konkola Copper Mines (KCM) has so far paid a total of around US $3 million towards its debt owed to local contractors and suppliers, an association has disclosed.

And the Association of Mine Suppliers and Contractors (AMSC) says the de-listing of Vedanta Resources Plc from the London Stock Exchange (LSE) last month will now mean less scrutiny of the activities of its subsidiaries, including KCM.

Last week, Mines Minister Richard Musukwa told Parliament that KCM still has a total outstanding liability of around US $80 million that the firm owes its suppliers and contractors.

Following that revelation, Wusakile independent member of parliament Pavyuma Kalobo called on KCM to leave the country if it cannot afford to meet its financial commitments.

But providing an update on whether the troubled mining giant has made any payments on its liability, Association president Augustine Mubanga revealed that KCM had actually started liquidating its debt.

He explained that of the total US $80 million owed, the firm owed around US $7 million to its local suppliers and contractors.

“The US $80 million, which the Minister [Musukwa] mentioned is the total debt that KCM owes to all suppliers, including foreign and local. But the local debt is in the range of about US $10 million as at September 30. But as it stands today, the debt that KCM is owing to suppliers and contractors is in the range of US $7 million now, which if they pay about US $3 million or so this month, then it will leave that amount of like US $3 or US $4 million to be settled in December,” Mubanga disclosed to News Diggers! in an interview.

“KCM has paid according to how we agreed. Two months ago, we agreed with KCM that the debt that they have must be liquidated in three months, which they suggested. The first payment done was last month; the second payment, they will be doing it next week and then the last payment will be done in December so that we will conclude the debt that is outstanding with KCM.”

Asked whether the VAT refunds owed by the Zambia Revenue Authority (ZRA) to mining companies was a factor in preventing KCM, among others, from liquidating their liabilities, Mubanga argued that this was an invalid excuse.

“Our position is that, ZRA is supposed to pay out VAT refunds to any company, including local companies, and by law, they are supposed to do that. But some of these things, you need proof, and the claim you are following up, is supported by documentation. In most cases, yes, mines could have lodged in a claim, but to some extent they are to blame for the delay because they might have not furnished the Authority with necessary documentation that must prove that, truly, the claims they are filing are well-supported,” Mubanga responded.

“When we are talking about VAT refunds, we are talking about a small percentage of the operational capital that any company may have. VAT is 16 per cent. Now, you must have liquid (cash) to sustain your operations rather than depending on a refund from the Authority because the Authority, to some extent, might be constrained in the sense of revenue collection. So, we feel that VAT must not be used as an excuse in operational challenges.”

And asked whether the Association had any concerns relating to Vedanta’s de-listing from the LSE last month in relation to the future ownership structure of KCM, he noted that the move may not change ownership of the mine, but de-listing will lead to less scrutiny of the firm’s activities.

“What Vedanta has now done is that, by de-listing, they have taken over all the shares and they have become the majority owners of Vedanta Resources. The challenge that is there is that, a company that is not on the stock market, especially the magnitude of Vedanta vis-à-vis Konkola Copper Mines, it casts doubt on certain credibility of information and also the corporate governance as well, might not be so strict on maintaining the corporate structure, and who they should employ…So, at the end of the day, you find that certain rules might be abrogated because there is no one who is monitoring the way you are running a company,” explained Mubanga.

“So, that is the worry we might have. But in terms of the future of KCM? It is a very viable mine, and with proper management, good production record, the company can change the landscape of mining.

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