PART I ZCCM-IH Crisis: Is the ‘Dodgy’ FQM deal and Banda exit Linked?


-Minority Shareholders complain of concealment of the KMP Royalty deal documents and the Mopani Copper Mines $1.5 Billion purchase agreement
-Board Chair Dolika Banda resigns due to alleged political interferences
-Shares suspended on the London Stock Exchange due to non-compliance to Disclosure and Transparency rules
By Mwansa Chalwe Snr

The recent events at ZCCM-IH, the anchor company for managing Zambia’s mining interests, should be of serious concern to all Zambians. This is so, because mining is the mainstay of Zambia’s economy. In most countries, this would have attracted vigorous and open debate. The resolution of issues concerning the three biggest mining houses – Kansanshi Mining Plc (KMP), Konkola Copper Mines (KCM) and Mopani Copper Mines (MCM) – are all housed at ZCCM-IH, is very urgent.

You cannot have a Board Chair resigning, Minority shareholders complaining about suspected opaque deals and the lack of transparency, and the company shares being suspended at the reputable London stock exchange; and the country continues with business as usual! This piece wants to elicit debate, with the view to persuade the authorities to prioritise the resolution of issues at ZCCM-IH and mining the sector in general, by taking immediate action to give hope to the people on the Copperbelt hope.


In order to understand what has happened at ZCCM-IH in recent weeks, the starting point should be the initiation of the controversial deal by ZCCM-IH and First Quantum Minerals (FQM) of Canada, to convert of 20% ZCCM –IH ordinary shares into a Royalty financial asset last year. The company’s Board of Directors are understood to have since approved the deal, after the government, as majority shareholder, voted for it in the Annual General meeting of 31st March, 2023.

In 2022, the Zambian government and First Quantum Minerals (FQM) of Canada, agreed to covert the dividend rights and economic value of Zambia’s 20 percent equity in Kansanshi Mining Plc into a life of mine royalty of 3.1 per cent of the gross value of Royalty products to be extracted from Kansanshi Mining PLC (KMP).

The majority of enlightened Zambians were against this deal. The deal raised many suspicions from the beginning, on a number of fronts. There were two key issues that people wanted clarity on. The first, was the status of the ordinary shares that Zambia held. The second was to ascertain the guarantee, stability and predictability of Royalty income in the agreement.

Whereas the government and ZCCM-IH presented a rosy picture about the transaction, arguing that there will be no change in the classification of shares, and that there was no risk in royalty income streams, this was debunked by First Quantum Minerals (FQM) public statements in Canada. The cautionary statement that FQM issued to the Toronto stock exchange on 1st December 2022, in announcing the transaction, and the other statements they made to the press, were more detailed and transparent, than what Zambians were made to believe by both ZCCM-IH and the Ministry of Finance through their press conference.

“At closing ZCCM-IH will de-recognise its equity stake in KMP as an investment in associate and recognise the acquired Royalty as a financial asset. The forward-looking statements in this news release include statements as to the anticipated conversion of ZCCM-IH’s ordinary shares into preference shares. The varied rights attached to the ZCCM-IH Class A shares in KMP will be amended and prescribed in the amended KMP Articles of Association (“New KMP Articles”) to be adopted at Closing. Pursuant to the New KMP Articles and the Termination Agreement between KHL, KMP and ZCCM-IH relating to the termination of rights and obligations under the KMP Shareholders Agreement.

“Certain statements and information herein contain forward-looking statements and forward looking information within the meaning of applicable securities laws. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information. The Company undertakes no obligation to reissue or update forward looking statements or information,” Statement issued by FQM in Canada on 1st December, 2022 stated.

The above statements were crystal clear to any technical person, as to what the nature of the transaction was, despite the statements being couched in some financial engineering language and legal jargon. It clearly indicates that the 20% ZCCM-IH ordinary shares will subsequently be converted to preference shares, which are almost equivalent to being a creditor with no voting rights. In addition, the existing shareholders agreement will be terminated with fresh articles of association drawn up.

The likely result of the entire deal was that FQM will be become a 100% owner of Kansanshi Mining PLC. Consequently, ZCCM-IH would cease to be a partial owner of Kansanshi Mining Plc. This transaction has been classified by critics as a de facto PRIVATISATION, through the back door. In addition, with regard to the guarantee of Royalty income, the cautionary statements seems to suggest that FQM has cleverly put in a disclaimer or caveat. There seems to be no guarantee that the purported income from the Royalties, based on projections, were going to necessarily materialize.

It must be understood that First Quantum Minerals’ desire to buy off the 20% Shareholding from government did not start last year (2022). The law suit by ZCCM-IH of FQM and its Directors, in the Lusaka High Court on October 28, 2016, where the company was claiming up to $ 1.4 billion from FQM Ltd for fraud, did not go down well with the owners and directors of FQM group. In February 2019, Mining Technology and Lusaka Times, quoting Bloomberg, reported that FQM had offered the Zambian government to acquire the remaining 20% stake in Kansanshi Mining Plc for as much as $700 Million. However, the PF administration then, seemed to have rejected the offer. It is in this context that the re-engineered Royalty deal should be looked at.


The argument by Zambians with regard to the Royalty deal is that the original objective of Zambia’s acquisition of minority interests in mining houses like KMP, was strategic and not just financial. The level of animosity against the transaction was reflected in the number of people who registered their opposition, including the News diggers Newspaper, who wrote several editorial Opinions criticising the transaction in the month of December, 2022.

“As we have said in our earlier editorial comments, this trouble that the UPND government has plunged itself in, is a result of failure to consult. The shares that ZCCM-IH holds in the mining companies are held in trust for the people of Zambia. The President and those around him need to distinguish personal property and government assets. When dealing with state assets, you ask the people first before acting,” the News Digger advised in one of its editorial opinions on the transaction.

There were many other commentators who opposed the transaction. And among them, was economist Dr. Lubinda Haabazoka, who felt that the deal needed to be debated by Parliament as ZCCM-IH belongs to Zambians, and as such, a fundamental decisions like that, needed their concurrence.

“Surely in whose best interest in this deal? Why can’t the other owners of the same mine also go into such type of arrangement with government to say ‘for our 80 per cent shareholding we are going to be getting this much. Why should they push it to us? For me I think this should have been taken to Parliament for debate. A lot of economic jargon is being used to confuse the population and posterity will judge us harshly. The generation of Dr. Kenneth Kaunda are turning in their graves because we have been unable to harness anything from the Mining Industry,” Dr. Lubinda Haabazoka lamented in an interview with the Mast Newspaper on the transaction.

The public argued that dividends are not the only reason that drive prudent investors. Asset growth can even be more important. It is also a known fact that KMP’s future growth prospects are currently very bright, given the electric car revolution and the growth in the green economy. And with its recent investment of $1.25billion to expand the Nickle Mine, it should be all the more reason to keep the ordinary shares. The expectation is that both dividend payments and the value of shares will exponentially increase in future. And so, ZCCM-IH stands to lose out from this expected success.

The other downside of the transaction is that the deal will give FQM 100% ownership of KMP and a carte blanche to make decisions which may not necessarily in the best interests of the country. There are so many intangible benefits attached to holding 20% ordinary shares. Zambia’s interests in the mining companies go beyond dividends or royalties. The current royalty deal has implications on the following: loss of value in capital gains on ordinary shares, possible loss tax revenue to government, illicit financial flows, transfer pricing risks, foreign exchange, corporate governance, national security and other intangibles. These should have been taken into account when the decision was being made, rather than to just the seemingly simplistic focus on the short term of royalty revenue only.

This first part of the article has given readers the background to one of the causes of the current problems at ZCCM-IH. In the next part, I will delve into the apparent deterioration of corporate governance at ZCCM-IH based on recent events. I will also analyse what could have led Ms. Dolika Banda to resign and highlight why ZCCM-IH shares were suspended from the London Stock exchange.

To conclude, I wish to remind the people who have counter views to this article, that we live in a democracy. And as Zambians we have freedom of expression. The criticism of the deal should not make people – especially those in public service – get hot under the collar. As public servants, if they can’t stand the heat, they better get out the kitchen. It should be known that ZCCM-IH does not belong to the government of the day, but to all Zambians. And so, they are all entitled to comment on the happenings at the company. And for those with contrary views, the best they can do is to write their own Opinion, and support it with facts, and not insult. The public will judge who is making more sense. Zambians have simply given any government, at a particular time, the stewardship function, and therefore those with delegated responsibility ought to be accountable. This article is all about accountability, period.


The writer is a Chartered Accountant and Author. He is a semi-retired international MSMEs Consultant. He is also an Op-Ed Contributor to the Hong Kong based, Alibaba owned South China Morning Post (SCMP)


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