A concerned citizen, through lawyers from L.J. Michaels Legal Practitioners, has written to Konkola Copper Mines (KCM) provisional liquidator Milingo Lungu demanding that the mining giant reverses the “wrongful sale” of KCM corporate control to Vedanta.

And Dennis Mumba, who is a contemporaneous owner of ZCCM – IH shares in KCM, also wants Vedanta to be compelled to pay back of funds it received through “illegal and unethical business transactions” since taking over KCM.

Mumba made these and seven other demands in a letter dated November 19, 2019 saying if they were not met within 90 days, he would commence legal action.

He also demanded that in the meantime, KCM liquidation should be halted.

In the 24-paged demand letter, Mumba detailed why he believed Vedanta became a majority shareholder in KCM in an illegal manner.

“Our client informs us that he has discovered information that shows that there was intentional deception and malafides when Vedanta purportedly took over 51% stake and control of KCM. We are advised by our client that he has investigated the ultra vires or illegal act that occurred at Konkola Copper Mines PLC (KCM) when Vedanta Resources Ltd (Vedanta) purportedly subscribed for 560,325,511 KCM shares for an amount of US$25 million that enabled it take over 51% stake and control of KCM. ZCCM – IH was a shareholder in KCM at the time this illegal act occurred and it has continued to be a shareholder in KCM to date,” read the letter.

According to the letter, Mumba decided to investigate the KCM sale after reading Andrew Sardanis’ book, A venture in Africa.

“In Chapter 32 Quo Vadit wherein the author writes about the mining sector in Zambia in general and more specifically on page 245 as follows: ‘The Vedanta deal was most unusual. The government of Zambia through ZCCM – IH and ZCI handed over 51% control of KCM by allowing Vedanta to subscribe new capital for $25 million. In compensation for the resulting dilution of the shareholding from 58% to 28.4%, ZCI received from Vedanta deferred payment totaling $23.2 million. On the same basis ZCCM-IH should have received $16.8 million for the dilution of its shareholding from 42% to 20.6%. But it did not. Instead, according to ZCI documents published on internet, ZCCM-IH received:
$16.8 million by way of debt cancellation arrangement with the GRZ (Government of the Republic of Zambia), whereby the GRZ will cancel debt owned by ZCCM- IH to GRZ’,” read the letter.

“Our client therefore set out to find out where Mr. Sardanis got the above-quoted information. In so doing he managed to obtain the 79 paged Zambia Copper
Investments (ZCI) circular to shareholders document relating to the Vedanta Buy-In of KCM. The terms of the KCM rights offer are on page 16 of the said document and what Mr. Sardanis quoted in his book aforementioned regarding the $16.8 million is on page 17. From pages 34 to 64 are KCM financial statements from 2001 to 2003 and six months results to 30th June 2004. Find attached the 79 paged Zambia Copper Investments (ZCI) circular to shareholders with the above referenced information on KCM.”

He said to date, there had not been any public refute of the information stated in the book.

Mumba made nine remedial action demands.

“1. Correct the illegal act that occurred when 560,325,511 KCM shares were offered to Vedanta at an unfair subscription price of US$25 million. To be unequivocal, we demand that you reverse the purported wrongful sale of KCM corporate control to Vedanta. 2. Disgorgement should also follow which should have the effect of returning Vedanta to its status quo prior to the wrongdoings. (That is pay back of funds it received through illegal and unethical business transactions since Vedanta takeover of KCM). 3. Recovery of proceeds to be recovered from wrongful sale and sue Vedanta for trespassing and damages it has inflicted on KCM 4. Proceed with legal action against all former KCM directors, management and advisors that breached their fiduciary duties for the losses that KCM has suffered as a consequence of their actions in this deal with Vedanta,” Mumba demanded.
“5. Justify the rationale and basis of your KCM valuation at the time of the Vedanta share deal. 6. Explain why the 560,325,511 KCM shares where subscribed for US$25 million by Vedanta at a discount of 61.538% of your own KCM valuation of US$62.451 million, when normal discounts on rights issues are in the range of 15% to 20%. 7. Provide details on why KCM issued 560,325,511 right issue shares, a 104 percentage of 538,351,962 KCM outstanding shares, in view of the fact that in European Union, countries like Germany restrict issuance of right issues to a maximum of 10% of outstanding shares. 8. Confirm that Vedanta did not pay to ZCCM –IH, US$16.8 million purportedly attached to the ZCCM – IH 560,325,511 KCM rights issues shares that were transferred to Vedanta. 9. You furnish us with evidence of Vedanta’s purported subscription payment of US$25 million to KCM.”

He also demanded that the liquidation process be halted in the meantime.

“In the mean time we demand that you halt your intended action to proceed to liquidate KCM because doing so would then cover up the fraud that has been perpetuated through the purported sale of KCM to Vedanta against the people of Zambia who are the ultimate beneficial owners of ZCCM – IH shareholding in KCM. Zambia can only be in a position to be able to trace and recover the funds siphoned from this Vedanta / KCM arrangement if KCM is still in existence, because the said opportunity will be obliterated if KCM is liquidated,” read the letter, which was signed by L.J. Michaels Legal Practitioners partner, Michael Moono.

“Our client instructs that if your good office does not comply with demands set out above, we shall proceed to commence legal action in the appropriate courts of law without further recourse to your office. We trust that an ex curia settlement is in the best interest of all parties concerned and shall receive the serious action of your office.”