|May 16, 2003
Surprise sale of state-owned copper mine
The Zambian cabinet has decided to sell a 51 percent stake in the country's state-owned Konkola Copper Mines to Sterlite Industries, an Indian company based in London. Information Minister Newstead Zimba said Sterlite would take over the running of the mine, abandoned by mining giant Anglo American last year, as soon as the details over payment are agreed in the coming weeks. "Sterlite in its bid has offered to subscribe for a 51 percent stake in KCM [Konkola Copper Mines] by way of an issue of fresh equity, which will inject new funds directly into KCM, thereby strengthening the balance sheet of the company significantly," Zimba said at a news conference. "Sterlite has made a commitment to funding a substantial capital expenditure programme thereby securing a long-term future for KCM and its workforce," Zimba said.
KCM is Zambia's biggest mining company with more than 11,000 employees. It accounts for about two-thirds of Zambia's metals production but last year made a loss of US $159 million. News of the sale to the little-known company has been received with caution. "I think the country's economy is directly headed towards oblivion ... I don't even know anything about this company called Sterlite, and for it to win a bid to run KCM must raise serious questions because Konkola is not a small entity - it's one of the biggest in the continent - and you would expect bigger and better known players to win the bid," commented Anderson Mazoka, the former regional chief executive of Anglo American, turned opposition leader. "The fact that the announcement of the sale has come from the minister of information raises further questions. It should have been announced by either the finance minister or the minister of mines," he added.
Glencore International AG, a commodities trading company with US $44 billion in sales last year, was among the four bidders for Konkola but was rejected. Glencore has already invested in Zambian copper mines run by Canada's First Quantum Minerals.
Zimba argued that Sterlite had a proven track record in aluminium and zinc mining with assets in India, Australia, Russia and Canada, and a turn-over of US $1.5 billion. He said it aimed to list on the London Stock Exchange, and over the last 10 years had grown "at a compound annual rate growth rate of 40 percent". International Monetary Fund Resident Representative Mark Ellyne described the development as "a good sign for the Zambian copper sector, as new capital will come in, and a positive sign for the Zambian economy."
Zambia's economy faced ruin after Anglo suspended its US $1 billion plan to develop Konkola, citing high production costs and low copper prices. Copper and cobalt exports account for about 88 percent of Zambia's foreign exchange receipts. (IRIN)