Vedanta pushes ahead to overhaul Zambia copper operation

LONDON (Reuters) - Vedanta Resources said it would push ahead with efforts to overhaul its underperforming copper operation in Zambia and was working to resolve a row with the government over its plan to cut jobs.

Vedanta, Zambia's largest private sector employer and biggest foreign investor, wants to slash more than 1,500 jobs by March as it cuts costs and mechanises its operations, long an underperforming arm of the group.

But the plan has met with fierce opposition from the government. Zambia last week revoked the work permit of the chief executive of Vedanta's Zambian business, Konkola Copper Mines. Populist President Michael Sata also has threatened to revoke KCM's licence if it proceeds with the layoffs.

"Obviously as you move away from (traditional) to mechanised mining, some changes in working methods need to be implemented," Chief Executive M.S. Mehta said in a call on Friday after the group published interim results.

He said Vedanta remained "engaged with the government of Zambia to ensure we start unlocking the potential of the copper belt".

Vedanta's executives later told analysts the layoffs were not "for tomorrow" and said they were optimistic on talks.

"This is a national asset but a national asset we have to run efficiently," he said.

Vedanta, an India-focused oil and gas and mining conglomerate, bought KCM a decade ago after the exit from Zambia of previous owner Anglo American .

But the business, which was intended as part of a push beyond India and as an effort to boost its exposure to copper, has repeatedly disappointed.

In earnings for the first six months of its financial year, Vedanta said Zambian copper production and profits dropped, while costs ticked higher. Core profits from the Zambian copper business accounted for just 4.5 percent of the group's total.

(Reporting by Clara Ferreira-Marques; editing by Jane Baird)