(Bloomberg) -- A South African court ordered the Zambian government to halt its liquidation of Vedanta Resources Ltd.’s Konkola Copper Mines unit pending arbitration.

The court ruled that the Zambian government breached its shareholder obligations, according to a judgment delivered in the Johannesburg High Court on Tuesday. Zambia was ordered to pay the legal costs.

Key Insights

  • The ruling blocks the Zambian government’s plan to sell KCM to another foreign investor. Companies including China Non-Ferrous Metals Co. have expressed an interest in buying the asset.
  • The judgment may signal the end of an often-turbulent decade for Vedanta in the country, where it’s been accused of paying too little tax and suppliers have complained of persistent late payments. Vedanta insists it’s been a “loyal investor.”
  • While the court decision raises uncertainty for mining companies about the security of their investments in Zambia, Mines Minister Richard Musukwa has said the dispute with Vedanta is “an isolated case” that should not be used to damage the southern African nation’s image.

Market Reaction

  • The seizure may further spook investors who have been rattled by the standoff. Yields on Zambia’s Eurobonds surged to new records above 20% since the dispute erupted last month, while share prices of other mining companies with operations in Zambia, including Canada-based First Quantum Minerals Ltd. and Gemfields Group Ltd., have also suffered.

Get More

  • Why a Tax Crusade in Zambia Worries Copper Miners: QuickTake
  • Vedanta Seeks Arbitration in Zambian Copper-Mine Dispute
  • Fancy a Bond Spread of 2,000 Basis Points? Just Buy Zambia

To contact the reporter on this story: Felix Njini in Johannesburg at fnjini@bloomberg.net

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Vernon Wessels, Jacqueline Mackenzie

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