Minority shareholders in ZCCM concerned about transparency

ZCCM Investments Holdings Plc (MLZAM) is under pressure from minority shareholders to boost transparency in the management of Zambia’s state-controlled mining-investment company and list on a regulated stock market.

Private investors, who hold 12.4 percent of Lusaka-based ZCCM-IH, are trying to install a representative on the board to improve corporate governance, Philippe Taussac, a France-based private investor, said in an interview in Zambia’s capital, Lusaka. Some minority shareholders want ZCCM-IH to trade on London’s Alternative Investment Market to boost liquidity, increase the share price and force the company to meet specific disclosure procedures, Taussac said on May 22.

The government of Zambia owns the rest of the company that has stakes in the local units of Glencore Xstrata Plc (GLEN) and Vedanta Resources Plc. (VED) Prior to privatization of the industry in the 1990s, ZCCM owned and operated most of the copper mines in the country.

“We must, as quickly as possible, leave this unregulated market,” he said. “A few of us think the AIM could be the best place at first.” London is “also the place where the biggest mining companies are quoted and listed,” Taussac said.

The shares gained 0.8 percent to 2.52 euros by 3:53 p.m in Paris, where they trade on NYSE Euronext’s Marche Libre, an unregulated over-the-counter market. It is also listed on the Lusaka Stock Exchange, where liquidity is limited.

ZCCM-IH owns 20.6 percent of Konkola Copper Mines Plc, a unit of Vedanta, and 20 percent of Kansanshi Mining Plc with the rest owned by First Quantum Ltd. The company also has a 10 percent shareholding in Xstrata’s Mopani Copper Mines Plc and Eurasia Natural Resources Company Plc’s Chambishi Metals Plc.

Mining Privatization

It was formed to hold the government’s minority interests in Zambia’s copper mines after the state privatized the industry between 1996 and 2001.

The company’s total assets increased to 3.1 trillion kwacha ($590 million) by the end of September from 2.7 trillion kwacha a year earlier, according to ZCCM-IH’s half-year financial statement. It has a market value of 37 million euros ($47.9 million), according to the website ofNYSE Euronext. (NYX)

“The company is highly undervalued,” and its “real value” is about $3.5 billion, Taussac said. “That’s why the people are there. They’re expecting to earn money.”

Minority investors backed Taussac to represent them on the board after ZCCM-IH last year issued a statement asking shareholders for nominations, he said.

Rights Offer

The Zambian government agreed to convert all or some of about 2.1 billion kwacha that ZCCM-IH owes it into equity through a rights offer, the company said in December. The appointment of a minority representative will only take place once the deal is concluded, ZCCM-IH said.

The sequence of events should be the “exact opposite” with the representative appointed before the debt-to-equity swap to protect the interests of investors, Taussac said.

“The issue of minority shareholder representation is still under consideration,” Chief Financial Officer Mabvuto Chipata said in an e-mailed response to questions. The company is also “reviewing its listings to determine the appropriate listings to maintain.”

ZCCM-IH intends to carry out the sale of stock to existing investors by the end of June following an asset valuation, Chief Executive Officer Mukela Muyunda on Jan. 31.

Minority owners of ZCCM-IH want to see that the valuation is done properly before they agree to take part in the rights offer, said Taussac.

“The general thinking of the minority shareholders is that they do not want to spend a penny more in the company without visibility and clear engagement from the company,” he said.

About 85 percent of ZCCM-IH’s minority investors are based in FranceBelgium and England, according to Taussac, who says he has been a shareholder since 2005 and holds 250,000 shares with his family.

Zambia produced 668,000 metric tons of copper in 2011, according to the U.S. Geological Survey.


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