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South African court blocks Zambian plan to sell Vedanta copper mine

By Tanisha Heiberg and Helen Reid
A man walks past the logo of Vedanta outside its headquarters in Mumbai

By Tanisha Heiberg and Helen Reid

JOHANNESBURG/LUSAKA (Reuters) - South Africa's High Court on Tuesday has ordered the Zambian government to halt the sale of Vedanta Resources's majority-owned Konkola Copper Mines (KCM) until a final decision is made through arbitration.

Vedanta has been locked in a dispute with the Zambian government since May when Lusaka appointed a liquidator to run KCM, which is 20% owned by Zambia's state mining company ZCCM and the rest by Vedanta. Zambia accused KCM of breaching the terms of its licence.

The dispute in Africa's second-largest copper producer has intensified concerns among international miners about resource nationalism in Africa.

Mumbai-listed Vedanta denies that KCM has broken the terms of its licence and says it will defend its assets in the southern African country.

South African High Court Judge Leicester Adams said on Tuesday in a ruling seen as a big win for Vedanta that wind-up proceedings must be immediately withdrawn until a final decision is made following arbitration.

"Pending the final determination of the arbitration, the first respondent is interdicted and restrained from taking any further steps in the furtherance and prosecution of the winding up proceedings," he said.

Zambia's Mines Minister Richard Musukwa said the government had advised its attorneys in South Africa to appeal the judgment and that foreign judgments were not enforceable in Zambia until they were registered in local courts.

"To that effect, it has no effect on the processes that are going on in Zambia," Musukwa said during a press briefing in Zambia.

Vedanta has welcomed the court ruling and said it was committed to resolving the dispute.

Vedanta had sought the urgent order in South Africa to prevent KCM from being wound up, arguing that the dispute should be subject to arbitration, which cannot happen if the Zambian government is pursuing a new investor.

Peter Leon, a legal expert and attorney with Johannesburg-based firm Herbert Smith Freehills said ZCCM could ignore the court ruling but this could result in a breach of the court decision or contempt of court unless it was appealed.

"This will inevitably have consequences for ZCCM once the arbitration itself commences in Johannesburg," he said.

Musukwa said last week that Zambia expected bids for the KCM business to be submitted within weeks by nine companies from Russia, Turkey, Australia, Canada and China - even as the court case over KCM's ownership was underway.


(Additional reporting Chris Mfula in Zambia; editing by Jason Neely and Emelia Sithole-Matarise)