FIRST Quantum Minerals has written to Attorney General Likando Kalaluka asking him to compel ZCCM-IH to drop a fraud case against the mining firm.
ZCCM-IH has dragged FQM to the Lusaka High Court claiming it cheated Zambia out of US$2.3 billion and the matter is expected to come up on May 9.
At the same time, ZCCM-IH has filed a Notice of Arbitration in London accusing FQM of defrauding it by using money from its Kansanshi Mining Plc as cheap financing for its other operations without its consent.
According to court documents, ZCCM-IH’s claim included $228 million in interest on the $2.3 billion as well as a further 20 per cent of the principal amount ($570 million), according to sources close to ZCCM-IH. The state-backed company is also seeking $260 million as part of a tax liability the Zambia Revenue Authority levied on Kansanshi.
According to the claim before the Lusaka High Court, between 2007 and 2014, FQM directors ordered over $2.3 billion of Kansanshi profits to be transferred to FQM Finance Limited, which performs treasury functions for the group.
FQM Finance then started investing money of Kansanshi to grow the group without ZCCM-IH’s consent.
But in a letter dated April 21 2017, FQM director of operations Arthur Matthias Pascall stated that ZCCM-IH’s claims are “vexatious and extraordinary”.
FQM wanted Kalaluka to force ZCCM-IH to drop the matter actively before the courts of law.
“ZCCM-IH’s claims are vexatious and extraordinary. First, they concern facts from more than a decade ago. The claim is focused on deposit account which continued with ZCCM-IH’s knowledge vis-à-vis approval of detailed disclosures as to the existence and utilization in the financial statements of Kansanshi Mining Plc and in sustentative correspondents with ZCCM-IH,” FQM stated. “Many documents demonstrating that ZCCM-IH’s knowledge of, and acquiescence to, the deposit account were lodged as affidavit evidence in the Lusaka High Court. The balance of the deposit account was fully repaid to Kansanshi Mining Plc, along with an interest rate on competitive market terms. The claim in the High Court appears to have been made without the formal approval of the ZCCM-IH board of directors which remains dissolved. Our understanding is that the current absence of constituted board prevents the matter from proceeding with valid authority.”
The mine stated that its top executives such as chairman and chief executive officer Philip Pascall and directors Arthur Mathias Pascal, Clive Newall and Martin Rowley were scared of coming to Zambia for fear of being arrested for fraud.
“We have also been reliably informed that ZCCM-IH is contemplating criminal proceedings against individuals named in the High Court claim. We are disturbed by this information because it shows that ZCCM-IH may be trying to use the criminal agencies of Zambia for no legitimate purpose but to leverage its position in the lawsuit. This is unacceptable. It is also false. Our directors and executives have always acted professionally, within the scope of the law and their duty to the company. The information about ZCCM-IH’s sinister intentions has deterred us from attending Kansanshi Mining Plc’s most recent board meeting in person, and prevented us from accepting meetings with certain ministry representatives about crucial questions relating to existing and planned investments,” FQM stated.
It further asked Kalaluka to force ZCCM-IH to drop the cases.
“We are certain you will understand that the threat of criminal proceedings, however unfounded, would undermine the good-faith basis of our negotiations,” the letter read in part. “We have been advised that the use of a country’s criminal agencies in the false pursuit of a private agenda may be raised as part of the Kansanshi Development Agreement investment arbitration, and that a tribunal can order to restraint such criminal proceedings. We hope you agree that ZCCM-IH should be instructed to steer away from this course. We respectfully seek your undertaking that any criminal proceedings arising from ZCCM-IH’s complaints against any FQM individual will not be authorized and actively discontinued by your office for the above reasons. By signing this letter in return, we ask you to confirm such an undertaking. Further, we also seek that your office requests ZCCM-IH to suspend its proceedings in the Lusaka High Court to allow the commercial matter to proceed in a commercial arbitration as the parties have agreed to do other contract. Pursuing parallel proceedings on the same facts between two different adjudicating bodies [arbitration tribunal and the High Court] raises a substantial risk of conflicting judgments.”
And FQM also wanted to Kalaluka to intervene in the difference it had with Zesco over power tariffs to its mining units.
“We are concerned that Zesco continues to assess us at higher tariffs while proceedings about the legality of the decision to vary our contractually agreed rates remain unresolved,” according to the letter. “While we are willing to engage with Zesco to achieve an overall package of electricity stability, we consider it is important for the judicial review proceedings to be decided with clarity as to the parties’ positions. We are unclear why the judicial review proceedings have experienced so much delay and we respectfully ask your office to ensure that they are now handled expeditiously and fairly. We are equally concerned that the lack of transparency around the tariff revisions shows a lack of standardized approach to pricing Zambia’s mining customers. Indeed, our own market intelligence suggests that we have always, and continue to be assessed at the highest rate among all mining customers in Zambia.”
FQM stated that by February this year, accumulated variance between Zesco’s invoiced electricity charges and the agreed ‘without prejudice’ tariff at Kansanshi Mining Plc was approximately $84 million.
For Kalumbila Minerals Limited, variance was approximately $112 million, but subsequently reduced by way of credit notes to $8 million.
FQM also lobbied Kalaluka to help it get about K1.8 billion Zambia Revenue Authority owed in VAT refunds.