Vedanta Resources, the mining company of Indian magnate Anil Agarwal, suffered a setback in its legal battle against the Zambian government.
A judge in Lusaka ruled that the company could not participate in the proceedings to close its Zambian unit Konkola Copper Mines, although it was granted authorization to appeal against the decision, which is being followed closely by the mining industry.
KCM is 80% owned by Vedanta and 20% owned by ZCCM Consolidated Copper Mines Investment Holdings (ZCCM-IH).
Zambia, which is struggling with high debt and shrinking foreign currency reserves, is seeking a larger share of its natural resource endowment, but its combative stance has rocked investors in the mining sector and may prevent other companies from investing in the country.
For its part, the government cited breaches of KCM's operating license and its financial position as a justification for its decision to put KCM in liquidation.
"The Zambian government has unjustly tried to exclude Vedanta from decisions about the future of KCM," the company said in a statement, adding that further action would be needed to counter the closure petition. "It can not be right for ZCCM, a minority shareholder, to pursue this process without the majority shareholder being heard. "
"ZCCM's actions are in violation of the KCM shareholders' agreement, which requires a process of involvement in any disputes between shareholders and, in the absence of an agreement, resorting to international arbitration in Johannesburg."
Vedanta also touched on recent comments by Zambian President Edgar Lungu on plans to sell KCM.
"The reports that President Lungu said expected negotiations with potential KCM buyers to be completed within a month are deeply troubling. They imply that the decision to sell the assets was taken before any court decision and without Vedanta having the opportunity to be heard, "Vedanta said.
"KCM is not for sale and Vedanta will contest any attempt to sell the business without their consent."