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wti copper mine dispute goes to court Copper mine dispute goes to Zambian court
By: Ronald Mwila
Posted: '01-DEC-06 15:00' GMT © Mineweb 1997-2006

LUSAKA (Mineweb.com) --Weatherly International Plc's Zambia-focused subsidiary, Puku Minerals Limited, has started legal action against the Zambian government over a disputed exploration and mining licence in the copper-rich Copperbelt Province.


The licence, PLLS 239, awarded Puku on April 4, 2005, covers the closed Luanshya Mine for which a certificate of abandonment No. 3 of 2005 was issued to Luanshya Copper Mines (LCM) Plc [then owned by Swiss firm J&W], which had bought the mine but then decided it was too flooded to operate.


Following this certificate, issued March 8, 2005, Puku applied for the tenement but to date LCM has not allowed them access to PLLS 239. Puku applied for PLLS 239 with a view to re-opening the Luanshya mine, which the company reckons has the potential of producing 60,000 tonnes of copper annually for at least 20 years.


Consequently, Weatherly raised US $7 million in London to develop the Luanshya mine and earmarked US $10 million for drilling and feasibility work this year aimed at re-establishing mining and processing.


Matters, however, took an unexpected twist when Lennard Nkatha, permanent secretary in Zambia's Ministry of Mines and Minerals Development, wrote Puku on September 29, 2006 that the government was cancelling PLLS 239 because "the abandonment certificate [No. 3 of 2005] was issued in error and consequently the prospecting licence No. PLLS 239 was granted over an existing mining licence No. LML 50, contrary to the provisions of section 14(c) of the Mines and Minerals Act." But Puku, through Weatherly, indicated that it would seek legal review of the matter immediately after that. And this the company has done.


Weatherly chairman Dr Wolf Martinick said on the sidelines of the Mines 2006 conference, which ended in Lusaka, Zambia on Friday, that the company filed an affidavit to the Lusaka High Court in a bid to "give [Zambia's] government a chance to put things right for the benefit of Zambia." The affidavit was filed on November 28, 2006.


Martinick said: "At a time when the government is reviewing development agreements with international mining companies as part of a planned reform of Zambia's tax system, it is surprising for the government to be acting this way. This cancellation of a licence some 18 months after it was issued and after we have raised large amounts of money for this project demonstrates high sovereign risk for foreign investors wanting to invest in Zambia. This has the potential to seriously undermine investor confidence and adversely affect Zambia's international credit rating at a time when [she] has made substantial advances in attracting a wide range of investors. I remain confident that this cancellation occurred in error and will be quickly rectified so that Puku can get on with re-opening the Luanshya mine. Our legal action gives the government the chance to put things right for the benefit of Zambia, Luanshya and Puku."


Weatherly's legal advisers in Zambia, Eric Silwamba and Company, are of the opinion that Puku is the rightful owner of the disputed licence, a position taken by the company's other advisors in London and Australia.


The legal advisors' view is anchored on the fact that Zambia's mining law does not allow for revocation of licence unless the holders have violated licence or other legal conditions, something Nkatha does not explain in his letter.


The disputed mine has an interesting history. After being successfully run by the Roan Selection Trust through Roan Copper Mines, it became part of Zambia Consolidated Copper Mines (ZCCM) in 1982 under the government of Zambia's nationalization programme.


When privatisation came, the mine was the first to be sold, going to the Binani Group of Companies, which operated as Roan Antelope Mining Corporation of Zambia (RAMCOZ). These investors operated the mine into liquidation in 2001, and it was sold to J&W in 2003.


J&W focused on the Baluba mine section while Roan was regarded as not being viable and in 2004, the company informed the mines ministry of its intentions to close the mine permanently. Therefore, an abandonment certificate was issued in 2005 after following environmental and other aspects of the closure.

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