KCM grapples to remain operational in Zambia

Operational problems at Konkola Copper Mine (KCM) have heightened because of a myriad of problems besieging the country’s leading producer of copper and cobalt.

Until Friday, Sept.26, KCM had power restricted to a number of operations including the concentrator at the Tailings Leach plant and the underground section which later was flooded with water, following a US$44 million debt accrued in unpaid energy bills to power supplier on the Copperbelt – the Copperbelt Energy Corporation (CEC).

Despite the unpaid bills, CEC decided to restore 100 percent power to KCM premised on the understanding that the company would meet its obligation as directed earlier by the Lusaka High Court that the company pay the US$44 million which had been outstanding since April this year.

CEC spokeswoman, Chama Kalima said the restoration of full power supply to KCM was done out of goodwill despite KCM failing to meet its financial obligations adding that is not right for any business that means well to wait for court orders for it to pay for services consumed.

“It is our hope that in response to this show of good faith, KCM will pay all its outstanding bills and begin to pay all their future bills as they fall due,” she said.

CEC believes it is important that all parties take learning points from this incident and begin to uphold obligations in accordance with the Power Supply Agreement (PSA), she added in a statement following interventions by the Ministries of Mines to have the matter harmonized to avoid ‘sabotage’ to the economy.
“Irrespective of this decision, CEC still reserves all its rights per provision of the PSA with KCM, which CEC will exercise should it become imperative to do so in the near future,” Kalima added.

The refusal by KCM to pay against invoices issued for about six months, even on undisputed amounts, has adversely affected CEC’s business and subjected the power company to subsidizing and sustaining KCM operations for the said period.

As a consequence, CEC has also been unable to fully discharge its obligations to ZESCO Limited.

Despite their continuous defaulting on payments, KCM also argues that they are not liable to pay interest, in complete contravention of the PSA.

“All this is unacceptable in normal business practice and should not be encouraged,” Kalima stated.

KCM spokesperson Shapi Shachinda has since confirmed the restoration of power to affected areas of the mines but lamented that the discharge of water from underground would take some weeks to be undertaken.

This is in the wake of the company losing US$3.3 million in revenue as well as 482 tons of copper in interrupted production of the red metal over the past few days.

on the operations of the mines by the management and seeks that the miner should revive its operations by injecting fresh capital into the company, these sentiments were brought to light by Vice President and leader of Government business in Parliament, Guy Scott.

Responding to lawmakers, Scott said it was his view that fresh capital be pumped into the mining company.

The lawmakers wanted to know the future of the mining company in view of reports in the media to which Vice President replied; “Our Government’s view is that KCM needs a fresh capital injection. Our experts, consultants and advisors say there is a requirement to put in more money if KCM is to be more viable.

”When Government suggested to KCM to recapitalise the mine, the other shareholders, Vedanta, responded by saying Government itself through ZCCM Investment Holding must put in money, Scott added.

Vedanta had also further suggested that they be allowed to borrow money from the local banks.

Dr Scott said the idea of borrowing money locally would not be okay as other sectors such as agriculture would be affected, he told lawmakers during question and answer sessions on Sept. 26.

Meanwhile, Minister of Mines, Energy and Water Development Christopher Yaluma earlier on Sept. 25 cited poor management of Konkola Copper Mines (KCM) as the major reason the mining firm has failed to pay the Copperbelt Energy Corporation (CEC) US$44 million in electricity bills.

KCM is currently going through serious financial challenges and that Government is closely monitoring the situation at the company to ensure it does not result in job losses.

He told lawmakers that is sad that the giant mining firm will not be able to meet the set production levels in the next quarter due to the power supply which has been restricted to 90 percent by CEC instead of the required 100 percent.

“Mr Speaker, although KCM is capable of running the mine, it will not manage to meet the production levels we have set in the next quarter due to the power restriction.

“But what I have to state is that KCM is going through serious financial challenges due to poor management of the mine and this has also resulted in the company failing to pay the money it owes CEC in electricity bills,” the Minister said.

Earlier, KCM, through its parent company Vedanta Resources mocked Zambians over its U$500 million profit being made annually in the Southern African country since it invested a paltry US$25 million in 2004.

And President Michael Sata had earlier warned the company against undertaking its planned mechanization of the mining company in which over 1,579 workers were to be laid off to replace them with machinery.

President Sata had also warned Vedanta to follow the country’s policy of seeking to create employment than facilitate “redundancies” to the nationals.

However, Shachinda in a statement has reaffirmed KCM’s commitment to remain in Zambia and contribute to the country’s growing economy and that there were no plans to leave the country in spite of the current problems being faced.

Vedanta Resources have since 2004 invested close to US$4 billion in operations and corporate social responsibility programs.


Source: Mining News Zambia

2017-02-13T05:16:43+00:00 September 30th, 2014|Investee companies, Konkola Copper Mines|Comments Off on KCM grapples to remain operational in Zambia