The Trouble With Vedanta Resources' Copper Operations in Zambia

Decisions surrounding Vedanta’s Zambian operations have their roots in the group’s overall copper operations.

Even as it commissioned the world’s first Red Mud Powder plant in India a few days ago, global conglomerate Vedanta Resources finds itself in sticky situation in Zambia – the Konkola copper mines, to be more specific.

FREE Download: The Monthly MMI® Report – covering the Copper market.

Vedanta’s indication that it was planning to give the pink slip to about 1,500 employees working in the Konkola mines over the next two years has placed it in direct confrontation with the Zambian government. Vedanta said the sackings would happen once the mechanization of the long under-performing mining operations there was over.

The Government of Zambia, though, has not taken too kindly to this proposition.

It did what probably any other government in its position would have done. It not only issued a warning that any attempt to lay off people in the mines would be met with stiff resistance, it went ahead and even canceled the work permit of the chief executive of Vedanta’s Zambian business. The government has also threatened to revoke the mining license itself if the job cuts happened.

Copper has become one of Vedanta Group’s bugbears of late. Overall, the mining group produces copper, zinc, silver, aluminum, iron ore, and electric power through its operations in India, South Africa, Zambia, Ireland, and Australia, among other nations. While announcing this fiscal year’s second quarter results, despite reporting increases in its oil, gas, and zinc operations, the company had admitted that the outlook of its copper and iron operations was far from optimistic.

For the Vedanta Group as a whole, the first half of the fiscal year has not been so good as it plunged to a loss of USD 217 million and reported a 14 percent decline in EBITDA to USD 2.207 billion.

Which brings us back to its Zambian copper mines.

FREE Download: The Monthly MMI® Report – covering the Copper market.

To be continued in Part Two.