VEDANTA executive chairman, Anil Agarwal, hasn’t entirely given up the notion of combining his group’s Hindustan Zinc with Anglo American which he said today was “a transaction that needs to be digested”.
He added, however, that Vedanta had been “cooking on cold water” in respect of the transaction after Anglo declined to take the discussions further once being approached by Agarwal last year.
Bloomberg News first reported Agarwal’s public confirmation of the deal in an interview at the World Economic Forum in Davos in January in which he said the combination made sense. Said Agarwal on the sidelines of the Mining Indaba conference in Cape Town: “The proposal went to the board but it was not the appropriate time. It was just an idea; a very friendly one”.
“We wanted to create a company with cash flow of $10bn with no debt and that would be in the league of BHP Billiton instantly,” he said.
On a shorter timescale, Agarwal has set his sights on developing the Gamsberg zinc deposit in South Africa’s Northern Cape province which he said was the first block in creating a Hindustan Zinc in Africa.
“Gamsberg will be a catalyst in South Africa,” said Agarwal. “We are entrepreneurs and there are some risks that we have to take. But I’ve found the South African government and its people have opened their arms.
“I don’t get pushed from pillar to post for approval and in South Africa you go by the rules,” he said. This is a far cry from the view of some international and domestic investors who say the country’s regulatory regime is troubled.
Vedanta is investing $400m building Gamsberg which will produce 250,000 tonnes of zinc in concentrate. About 100,000 tonnes of this would be refined at Vedanta’s Skorpion zinc complex in Namibia. The company was also assessing doubling production to 400,000 tonnes of zinc metal a year, an investment that would require some $500m in capital.
Vedanta also operates Konkola Copper Mines which is slated to produce 140,000 tonnes of copper in the Indian group’s 2017 financial year.
Said Agarwal: “Africa has to do a lot of PR … One thing I can tell you is that government has a very good mission. I fully agree foreign investment is not coming, but we have to build the infrastructure. I think things will improve”.
Delivering a speech at the conference, Vedanta CEO, Tom Albanese, said that South Africa “… can be a place for investment with the right projects and right investment attitudes”.
“We are expanding while others are contracting in South Africa. We are extending the life of business in Skorpion; we can see a 10-year pipeline ahead of it.
“In Zambia, we have the largest copper business in the copperbelt. We do have some turnaround challenges, but we remain committed and I see a 50-year vision of investment there.”
Commenting on market conditions, Albanese said that while there had been a 53% increase in the group’s commodity basket, it was still “quite a modest” again compared to price levels in the super cycle.
“We will see a progression of supply tightening events which will whittle away the surplus surplus month, after month, after month,” said Albanese.