Konkola Copper Mines Provisional Liquidator Milingo Lungu says he is operating without a remuneration agreement with the mining company or its shareholder ZCCM-IH, and as such it is not true that the money which the Zambia Revenue Authority is paying KCM in tax refunds can be used to settle his legal fees.
And Lungu says it will be contemptuous for government to sell KCM before the court case surrounding the liquidation of the mine is concluded.
He also says that there is no prospective investor who is conducting due diligence on KCM because there is no contract of sale to anyone yet, contrary to the explanation made by Mines Permanent Secretary Paul Chanda who was quoted in the Zambia Daily Mail Thursday edition saying “investors are visiting KCM for due diligence to understand the operations”.
When reminded that he denied making a tax-refund claim during an interview on Wednesday, yet ZRA had confirmed that they were in receipt of a claim from KCM, Lungu recollected that he had actually made a claim immediately after being appointed liquidator, but that ZRA informed him that they were not paying any tax-refunds during the transition into Sales Tax regime.
In the verbatim interview below, the KCM liquidator explains how much money the company has received from ZCCM-IH so far, and how he is generating income to pay workers’ salaries, suppliers and creditors.
Milingo: I have seen the article in your paper saying that we received a (tax) refund which I have appropriated towards my fee. I think the story is false. One, as liquidator I haven’t received any remuneration from KCM so far. Even the tickets which I am using to go to and from KCM, I am paying from my own pocket, okay? Two, there is no VAT refund which has been appropriated towards my fees because I have got no agreement for fees as at yet with KCM or anyone else. If you want you can fact-check, you can come to KCM and see whether they have paid me a single penny, you are at liberty to do that. There is no need to speculate.
Joseph: I wonder how the public will take the fact that you are not getting paid for this and you are using your own resources.
Milingo: You can be rest assured that I will get paid, but the fact of the matter is that at some point, there must be an agreement. I can’t be paid without the agreement. So far, I don’t even think there is an opportunity to conclude an agreement because practically every week we are in court.
Joseph: Back to the Tax Refund issue. The ZRA has confirmed that there was a Tax Refund claim made by KCM, but yesterday when you were called to explain this, you rightly said you never made any claim and as far as you knew there was no one who had made that claim, would you care to explain that?
Milingo: When we took over, we found absolutely no resources at KCM by the way. I think the KCM accounts had just K600,000. So we approached ZRA to say ‘can we have some of the refunds which were being owed’, but ZRA said ‘look, whilst we are doing this transition to Sales Tax, we are not refunding anyone, until we complete the transition. So that was the request I made, now on the side, between ZRA and KCM, there is a pre-existing agreement which was there even before I came onto the scene, where KCM and ZRA reconcile and net-off tax figures. So I don’t think you can say that is a payment in terms of cash coming into KCM, there is none. It’s simply a net-off to say you owe me K10, I owe you K5, enter in your book and reduce it to K5. It’s just book entries.
Joseph: So that means the request you made has not been honoured in cash terms by ZRA?
Milingo: No, I have not been given any cash.
Joseph: You have said you have no fee agreement with KCM, not even ZCCM-IH as provisional liquidator, how does that work, how are you operating?
Milingo: What is supposed to happen is that there is supposed to be an agreement with the committee of inspectors, there has been no committee of inspectors appointed yet.
Joseph: Is that the normal procedure that you start working without an agreement of how you will be paid?
Milingo: Yes, that is how it is supposed to be. If it was liquidation… you see, what you must understand is that right now we are not in full liquidation, we are in provisional liquidation. So I have to approach either ZCCM-IH or KCM for my remuneration. But owing to the precarious position in which the mine is in, that’s the last priority.
Joseph: What is your immediate priority?
Milingo: My immediate priority is that, one, we must get the smelter and the plants running. Two, is to get mining activity at Konkola, and then to start dismantling the debts which are owed to the suppliers. After we have done all that is when we can go to the discussion of remuneration. This is not even an issue I have brought up because I don’t think it would be morally right for me to start demanding for legal fees when the workers and suppliers haven’t been paid.
Joseph: In what state is the smelter right now, is it working normally?
Milingo: Like I said, the first priority was to get the smelter and plants working. So the smelter and the TLP (Tailings Leaching Plant) are working, that was my first priority. All the revenue and money we got was to pay critical and urgent suppliers to restart the smelter and TLP. I think as you know, by the time we were taking over, these two plants were down because the previous management had been failing to pay suppliers and they had withheld their goods and services. So that was the first priority, we haven’t paid the suppliers in full, we have paid them just enough to restart critical supplies of goods.
Joseph: But considering that production across all KCM business units is almost zero, where are you getting the resources to pay salaries and to pay suppliers?
Milingo: Okay, so the way the mine runs is that there is an integrated process. There were some stockpiles at Konkola and Nchanga and then we are also getting, on a tolling basis, concentrates from Congo. Now once we treat those concentrates on a tolling basis with acids with we use in the TLP, so the copper which we produce in the Tailings Leach Plant is the one which is sold on a cash basis and that’s the money we are using for all these things. So for example, this month, we are projecting that the TLP will produce 4,500 tones, that’s the money we are going to use to offset some of the creditors and supplies which we are getting.
Joseph: Are you saying it is not true that you are getting help from government and ZCCM-IH to pay salaries and other financial obligations?
Milingo: ZCCM-IH, we only get a once-off amount and I think it was in public domain, I think the minority shareholders did allude to that. Now when you are running a mine, US$10 million is nothing. That’s just enough to pay electricity by the way. The salary bill is almost US$11 million. We have to sell copper cathodes to be able to pay our way out. So to say there is zero production is not true. If you want I can even send you the production figures for last month, this month and the forecast.
Joseph: Please help the public understand. Why is there all this activity with the investors at KCM when the court case where Vedanta is challenging the liquidation is going on? Surely, as an officer of the court and lawyer in charge of this liquidation process, you must be concerned that due diligence is taking place to sell the mine before the court matter is disposed off. Is this normal? Will this not attract litigation on the part of government?
Milingo: That’s the other issue as well. Where people are saying there are due diligence procedures being conducted. Due diligence can only be conducted after there is a contract of sale.
Joseph: But that was the Permanent Secretary in the Ministry of Mines Mr Paul Chanda saying that. He is quoted on the front page of today’s Daily Mail saying investors are visiting KCM to conduct due diligence and to understand the operations of the mine.
Milingo: Yeah, but the Permanent Secretary is not a lawyer, you only conduct due diligence on a company after you have signed a contract of sale. So there is no contract of sale between KCM and anyone.
Joseph: So what can we call what the Chinese are doing at KCM, where they are going into all the company departments to check the status and familiarize themselves with operations of the mine? If that is not conducting due diligence, then what can we call it?
Milingo: These are simply expressions of interest where someone says ‘after the court process finishes, I would like to buy’.
Joseph: But they are familiarizing themselves with the operations of the mine?
Joseph: So you are assuring the public that despite what is happening at KCM, the mine will not be sold until the court process is finished? And what if the court outcome goes the other way after all this?
Milingo: I don’t think there is any law which prohibits someone looking at an asset with the intention of buying. The court case might go against the government, it might go for the government, but I don’t think there is anything that stops the government from pursuing its intention of wanting to sell. The issue which would be contemptuous would be to sell the mine before the court process is concluded, but there is no sale.
Joseph: Thank you very much for explaining this to us and the public.
Milingo: You are welcome bye.