KCM explains why it has operated at a loss for the past 7 years
……… US$136.9 m loss recorded after taxes
By Staff Reporter
KONKOLA Copper Mines has filed an answer to a petition in which ZCCM-Investment Holdings wants it to be wound up saying it will be up to the Lusaka High Court to determine.
KCM however, stated that it does not admit to the petition in relation to how it is managed.
KCM advanced reasons why the mining company has operated at a loss for the past seven years as was reported in its report.
The mining company stated that it recorded a loss after tax of US$136.9 million.
KCM explained that the main reason for the above is the drop in the planned production of 110, 981 Copper metric tonnes mainly due to lower primary development against planned production as per KCM business plan by 7,818 Metres.
The firm stated also that there was loss in secondary development as well of approximately 16,698 meters due to no capital expenditure allocation for it .
KCM stated that the reason for KCM’s failure to abide by the mining plan was due to consistent failure to meet targeted primary and secondary developments as per its business plans .
KCM stated that this resulted in liquidity challenges that had further resulted in the mining firm’s failing to generate enough revenue to cover its operation costs.
KCM added that there had been no direct capital investment by the shareholders and that the major component of the investments undertaken were financed largely by loans both from third parties and Vedanta which were now being paid back by the mining firm despite not making profit.
“The higher interest rates charged by Vedanta group on its consolidated loan to the respondent (KCM) to the principal of US$1 billion contrary to the shareholders agreement thereby locking the respondent company cash flow,” KCM submitted.
The mining firm also stated that KCM had been paying Vedanta a sum of US$1 million in management fees in addition to disbursement and reimbursement for providing management services to it which have largely contributed to the liquidity constraints being faced by the firm.
They added that they had debts due to third parties or business partners, including those specifically mentioned in the petition but the reason for the failure or omission to pay the debts have been due to liquidity constraint as a result of matters already stated
And KCM stated that it was up to the court to decide whether the company ought to be wound up.
Meanwhile, KCM legal counsel and acting secretary Maxwell Mainsa has filed an affidavit in opposition, stating that the aggregate amount in dividends declared in the last 15 years up to the presentation of the petition was US $147,96 million.
He stated that he had read a copy of ZCCM-IH chief executive officer Mabvuto Chipata sworn in affidavit of June11, 2019 and agreed that it was true that KCM has not paid ZCCM-IH or any other shareholder any dividend due to them in respect of the dividends declared in the 2013 financial
Mainsa stated that the failure to pay ZCCM-IH portion of the declared dividend was because of the drop in KCM’s cash flow or liquidity constraints and the conditions that were supposedly to be met.
He added that it was true that KCM had operated at a loss amounting to US $1. 2623 billion in the last seven years, explaining that the loses have been incurred as a result of financial year 2018 in which the firm recorded loss after tax of US$ 131.6 million for many reasons.