Vedanta Resources said it planned “hundreds of millions of dollars” in capital spending cuts and deferrals, while looking at a “deep restructuring” of its struggling Konkola Copper Mine. This could lead to job losses.
The company is “reviewing our operations in the light of lower copper prices, the VAT refund issue and the changes to royalty regime,” Vedanta said in a statement on its website.
Already Barrick Gold (Lumwana) said in December it would start the process of putting its Lumwana mine in northwestern Zambia under care and maintenance because of slumping copper prices and the new tax system.
Vedanta spent $1.42 billion (0.94 billion pounds) on capital projects in year ended June 30, 2014, down from $2.02 billion a year earlier.
The sharp fall in copper prices CMCU3 has exacerbated Vedanta’s problems in Zambia, where operational issues and rising production costs, among other issues, have hurt its copper mining business over the past few quarters.
The Zambian business, Konkola Copper Mines (KCM), contributes about 9 percent of Vedanta’s revenue but showed nil core earnings in the latest quarter.
Vedanta said the government’s decision to raise underground mining royalties to 8 percent of gross revenue from 6 percent starting from 2015 would result in a $15 million hit on core earnings in the current quarter.
KCM Chief Executive Steven Din said management would meet Zambian officials next week to discuss ways to stem the negative cash flow at the unit, which is 20.6 percent owned by the government.
Talks are also planned with bankers next week regarding KCM’s debt repayments, Din said.