We will tell you about the troubles of a charitable organization whose goal is to help your region (with tens of millions of $).

The capital of KCM (Konkola Copper Mines) is divided between various owners as follows:
-51% VEDANTA, an Indian corporation
-28.4% ZCI (Zambia Copper Investment), a legal entity from Bermuda
-20.6 % ZCCM-IH (88% of which is owned by the GRZ Gvt of the Republic of Zambia)

The Indian corporation VEDANTA bought 51% of KCM stock in November for a mere US$48m ($23m for ZCI, and $23m for KCM); back then, this sale came under fire and was described as an outrageous pillaging of Zambian resources.

VEDANTA currently holds a call option on the 28.4 % of KCM still owned by ZCI.

On Thursday, January 17, 2008, Rothschild banking, who had to assess its value as it stood in August 2005 (although the evaluation came out in 2008) came up with the figure of US$213.85m for the above mentioned 28.4%, thus evaluating KCM at US$750m. Vedanta can either accept or refuse to go on with the call, but ZCI cannot refuse to sell.

Why call this a new plunder committed against the people of Zambia?

At first sight, it might seem irrelevant to evoke Zambians since ZCI is based in Bermuda. In addition, most journalists and politicians in Zambia routinely refer to ZCI as exclusively foreign interests.

In 2003, the Anglo-American Company owned half of ZCI when it decided to part with ZCM. At that point, it transferred its stock to a Zambian foundation and to the Trust of Employees of KCM. In the annual report of ZCI for the end of 2002, available online at the following address:

http://www.zci.lu/annual_report_2002.pdf,

one can read (pp 1-2) :

"As a consequence of this restructuring, your company is now owned 47.7% by public shareholders, 44.3% by the CDF (Copperbelt Development Foundation) and 8% by the ESOT (KCM Employee Share Ownership Trust)."

"The Copperbelt Development Foundation (CDF), whose objectives are, inter alia, to promote diversification of the economy of the Copperbelt Province of Zambia and to promote the social development, relieve poverty and contribute to the provision of health, education and other social services in the Copperbelt Province and Mumbwa District of the Central Province of Zambia, (…)"

Public shareholders are shares on stock exchange, in Paris and Johannesburg, most of them possessed by small’s shareholders


Between 2005 and 2006, ESOT distributed its stock to KCM employees, so that today, the latter must control 8% of ZCI. As a result, ZCI is mainly owned (44.3+8=52.3%) by interests in Zambia. And we’re not talking wealthy Zambians who took advantage of KCM’s rise and thus of that of ZCI, but on the contrary low-income workers, thanks to the action of The Copperbelt Development Foundation.

When it was created, the CDF receive only few cash ($1.5million in September 2002), and many ZCI stock. Consequently, the foundation will be able to conduct its charity work only when KCM distributes money. But Vedanta, which controls KCM, hardly ever gave anything, in spite of the huge benefits it made almost overnight.

Let’s now come to the plunder.

All the surveys, all the evaluations conducted by various financial audit agencies are way above this figure. For instance, for the year 2005, Morgan Stanley, in a survey about Vedanta dated December 15, 2005, evaluates the 51% of KCM as US$1,321m, which makes KCM US$2,590m worth, far above the US$750m proposed by Rothschild. Other subsequent assessments are even higher. When the evaluation came out, Lehman Brothers, a financial analyst, immediately concluded that it was a bargain because KCM was worth at least twice this amount.

Vedanta acquired KCM in November 2004. Between the end of December, 2004 and the end of September, 2007, the share of the benefits one can safely attribute to 28.4% of ZCI (and that has remained so far undistributed) reaches more thanUS$144m.

(In ZCI financial reports, we found: in December 31, 2004: "Investment in associated companies 61,282" and KCM is the only one investment in associated companies of ZCI, and in September 30, 2007 (the last report): the line "Investment in associated companies" disappear, but the line "Assets classified as held for sale 205,398" appear, and the difference between the 2 lines = 205.398 - 61.282 = US$144.116m and represent the "Dividends not received").

So, Vedanta will pay only US$213.15m for shares with dividends not received attached of US$144.116m? So the real price will only become 213.15-144.116= US$69.034m for Vedanta. About the amount of profit for one year of exploitation of the mine!

And ZCI has a current account with KCM of $ 47.5 million, the form of deferred shares (see VEDANTA 2007 Annual REPORT, p. 95 of the report (97/140), "Non-equity minority interests are represented by the deferred shares in KCM held by ZCI of $ 47.5 million and ZCCM of $ 11.9 million."). It seems that this sum will also be acquired at Vedanta if the transaction takes place, so the real price will only become 69.034-47.5= $ 21.534 millions for Vedanta!

Today, in January 2008, the price at which Vedanta may purchase the 28.4% of KCM is set at August 2005, but between August 2005 and January 2008 the price of the shares of Vedanta on the London Stock Exchange was multiplied by 4 or 5.

CONCLUSION:
Finally, in January 2008, for 28.4% of KCM, the largest copper mine in the world, the jewel of the Copperbelt, it will cost only $ 21.5 million to Vedanta.

And if ZCI is dissolved following this, the Foundation will receive only about $ 100 million for carrying out charitable and development of the the Copperbelt Province and Mumbwa District of the Central Province of Zambia (although it should be at least three to five times higher, and that if Vedanta had distributed the money earned since 2004, The Foundation has already reached over $ 60 million without selling KCM shares!)

This is plunder.
This is highway robbery.

ZCI being held in majority by Zambian interests, it is the Zambian people who, once again, are being deprived of retribution for their natural resources by a powerful foreigner.

The ambition of the Foundation was, as quoted above, to « promote social development, relieve poverty and contribute to the provision of health, education and other social services » ; this ambition has been thwarted, and it is not the wealthiest Zambians who will suffer from this plunder, but the poorest , the most needy, those precisely targeted by the Foundation. Meanwhile an Indian billionaire is getting richer and richer.

Will this state of affairs continue and will journalists, politicians and GRZ look the other way? Or will the GRZ step in to stop the plunder?

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