KCM operated at a loss – Mainsa

KCM operated at a loss – Mainsa

KONKOLA Copper Mines has conceded that it has been operating at a loss of over US$1 billion in the last seven years as a result of loss after tax, among other reasons. This is in a matter where Zambia Consolidated Copper Mines Investment Holdings has petitioned the mining firm seeking an order that be wound up for failing to honor it’s tax obligations and being managed in a manner that may cause harm to the interest of government.

KCM in it’s affidavit in opposition to the petition, sworn by Maxwell Mainsa, a legal counsel and acting company secretary of the mining company, stated that the aggregate amount in dividend declared in the last 15 years up to the presentation of the petition was US$147.96 million. KCM stated that it was true that the firm had not paid ZCCM-IH or any other shareholder any dividends due to them in respect of the dividend declared in the financial year 2013. It stated that the failure to pay the petitioner’s portion was due to a drop in its cash flow.

“It is true that KCM has operated at a loss amounting to US$1.2623 billion in the last seven years,” reads the affidavit.

And in its answer to the petition, KCM said that it was not being managed in a manner detrimental to government interests and attributed its losses to a drop in production. According to the affidavit, for the financial year 2018, KCM recorded loss after tax of US$131.6 million.

“The main reasons are as follows; (i) the drop in the planned production of 100,610 CU MT due to lower primary development against planned as per KCM business plan for the financial year by 701 metres; (ii) there was loss in secondary development of approximately 2,231 meters due to no capital injection in development of the mine,” according to the affidavit.

“(B) for the financial year 2017, KCM recorded a loss after tax of US$136.9 million. The main reasons for this are as follows: (i) The drop in the planned production of 110,981 CU MT mainly due to lower primary development against planned as per KCM business plan by 7,818 metres; (ii) There was loss in secondary development as well of approximately 16,698 metres due to no capital expenditure allocation for this.( iii) For the financial year 2015, KCM recorded loss after tax of US$1bn

The reasons for respondents, company’s failure to abide by the mining plan in the petition is that

  1. c) there has been consistent failure to meet targeted business plans. This has resulted in liquidity challenges that has further resulted in KCM failing to generate enough revenue to cover it’s operations cost and thereby primary and secondary development,” read the court documents.
  2. KCM stated that there had been no direct investment by shareholders.

     

    “The major components of the investment undertaken were financed by largely loans from third parties and Vedanta Resources Holding limited and were now being paid back by KCM despite not making profit.

     

    “The higher interest rates charged by Vedat group on its consolidated loan to KCM to the principal sum of US$1000,000,000.00 (1billion) contrary to the shareholders agreement thereby locking KCM’s cash flow. (f) KCM has been paying Vedanta a sum of 1million in management fees in addition to disbursements and reimbursement for providing management services to KCM. These factors have largely contributed to the liquidity constraints being faced by the respondent,” according to KCM.

    KCM also admitted to have been found liable by the High Court in a matter where James Nyasulu and 2000 others sued it for polluting the aquatic environment including the Kafue River, Chingola and Mushishima stream, rendering the polluted water harmful to the aquatic environment, infrastructure and harmful for agricultural purposes or human consumption.

    The mining firm said it is for the court to decide whether it ought to be wound up.

    Source :THE MAST