MAC: Mines and Communities

Vedanta update

Published by MAC on 2007-02-02

Vedanta update

2nd Feburary 2007

* Agarwal goes for Indian iron, steel and gold

* Armenian government revives case against Agarwal over multiple deceptions

* Opposition mounts against the Agarwal university proposal

Agarwal's Big Steal

Rumours circulated last week in London (possibly promoted by brokers or hedge funds) that Vedanta is now "ripe" for a takeover.

This doesn't seem likely, but who knows?

The speculation followed two announcements by the company that it is in "talks" with some global steel companies to advance its intentions in India. Mittal and Posco have been mentioned as putative joint venture partners with Vedanta.

As yet, neither Tata, BHPBilliton, nor Rio Tinto (with their greasy claws poised on Orissa) seem to be talking with Agarwal. However, on January 31, Tata finally secured Corus, the UK-Dutch company which is the second biggest steel maker in Europe. What more thrilling game could Agarwal now contemplate than linking with Tata-Corus?

After all, he has an MOU with the Orissa state government, signed three years back, to set up an iron/steel unit in Keonjhar, while the purported EIA for the Nymangiri mine was carried out by Tata-AIG.

Never one to bet on only one horse, Agarwal has also expressed interest in acquiring Mitsui's 51% stake in Sesa Goa, the large private iron ore company operating in India.

To cap it all, the bauxite bandit announced just over two weeks ago (as he was receiving a prestigious Indian industry award for corporate excellence) that he's also going after gold, strongly hinting that Vedanta is in the running to acquire Kolar Gold Fields in Karnataka, should it be privatised.

It's more than a year ago that Agarwal said he intended to diversify into iron and gold, but now he's more specific in identifying his targets.

Doubtless, he was given a boost in this direction by managing to persuade Canadaian regulatory authorities to support his takeover of Sterlite Gold in Armenia last year - a company which he promply merged into Vedanta Resoures plc in the UK.

Not that the going will be smooth. After apparently shelving a case laid against him for a brace of alleged deceptions associated with his gold operations in Armenia, the government there is now reviving its legal proceedings.

Cash for Honours

Meanwhile, as Laskmi Mittal (who's just given the faltering British Labour Party two million quid) and Ratan Tata (a select member of British Chancellor of the Exchequer Gordon Brown's economic think tank) wonder whether they'll get a peerage or a knighthood in return for "Backing Bliar", Agarwal must also be cherishing the prospect of a UK honour of his own.

Last week, the same Gordon Brown declared that "immigrants" to these isles should have to perform a test of their "Britishness"; and if anyone's likely to fall foul of this spurious criteria it's going to be poor British south Asians (especially women).

Upper-class Indians, secure in their luxury London mansions, don't need to worry a jot.

[Commentary by Nostromo Research, London, 2 February 2007]

Vedanta in search of steel partner

SAMBIT SAHA. The Telegraph, Kolkota

14th January 2007

* A 6-million-tonne plant in Orissa to mark the entry of Vedanta Resources in steel

* Vedanta likely to ink pact with a steel firm for the project by year-end

* Vedanta to focus on iron ore mining, partner firm to make steel

* A 50:50 joint venture may be formed

Calcutta, Jan. 14: Vedanta Resources Plc is in talks with global steel firms for its 6-million-tonne plant in Orissa.

Anil Agarwal, chairman of the FTSE 100 company, told The Telegraph that he expected to sign the agreement with his collaborator by the end of this year.

This will mark the entry of Vedanta, which is in aluminium, zinc, copper and lead, into iron and steel. This sector is flush with investment proposals from domestic and foreign majors such as Posco and Mittal Steel.

"Our core competence is in mining. We will focus on iron ore mining, while the other company will make steel," Agarwal said.

The foreign firm is likely to pick up a sizeable stake in the project that targets investments of over Rs 12,000 crore. "We can do it as a 50:50 joint venture," Agarwal, who was in the city over the weekend, said.

Vedanta, which is expected to post $7-billion revenue this fiscal, is among the top 10 mining companies in the world with operations in India - through Sterlite, Balco, and Hindustan Zinc - Zambia, Australia and America.

According to the memorandum of understanding signed between the Vedanta group and the Orissa government in October 2004, the unit at Palasponga, Keonjhar, will be set up in two phases.

Among the global steel giants, only Posco and Mittal Steel have firm plans for India, while the others are waiting in the wings. Steel can be produced cheaply in India, which has the third largest iron ore deposits in the world.

According to the government estimates, India's current production of 42 million tonnes will reach 110 million tonnes by 2020, propelled by the infrastructure sector.

However, both domestic and foreign players are finding it hard to obtain mining leases.

Vedanta, which is implementing $4.8 billion worth of aluminium and power projects in Orissa, may find it relatively easy to get a lease.

Sesa Goa stake

Agarwal's foray into ferrous metal will not be limited to the Orissa project. Vedanta has put in an expression of interest for Mitsui's 51 per cent stake in India's largest non-captive private sector mining company, Sesa Goa.

The Japanese company has put its stake in the block. Reports suggest that the world's top miners such as BHP Billiton are interested to buy Mitsui's stake. Mittal Steel is also believed to be interested in the company.

The plans for Sesa Goa fits in with Vedanta's mission to be among top mining companies in the next three to five years. "We want to reach the number three or four slot among mining companies," Agarwal said.

Vedanta is implementing projects worth over $7 billion only in mining that will be completed in 2009.

Gold business

As part of its diversification plan, the company has recently stepped into precious metals with the acquisition of a gold mine in Armenia, which has been renamed as Sterlite Gold. Agarwal said he was keen on the PSU Bharat Gold Mines which owns the Kolar goldfields in Karnataka.

Vedanta eyeing Indian gold mines

Business Standard Reporter / Kolkata

15th January 2007

The Vedanta group, the eighth largest mining and metal company in the world, is all set for a gold rush in India.

The Anil Agarwal-controlled company already has interest in gold in Australia and Armenia and the next destination could be India, if the government allows gold mining. It might be noted that the Vedanta group is among the world leaders in aluminium, copper, zinc and lead.

The chairman of Vedanta group, Anil Agarwal informed that Sterlite Gold, the company floated for gold mining is keen to start activities in India. Agarwal was in Kolkata on Friday to attend the CSR summit organised by Institute of Directors. According to Agarwal, Sterlite Gold would bid for gold mines like Colar [Kolar] and Bhati, if the Union Government wants to disinvest those. "If the government wants to divest gold mines, we are definitely there," he added.

Elaborating the future plans of the group, Agarwal pointed out that the group would invest close to Rs 15,000 crore in India in its different projects in next 3-4 years. This would be in aluminium, zinc, copper and power. "We are targeting top three slots in mining and metal industry from the current eighth slot. We want to achieve this target in next 4-5 years. We are looking at one million tonne production of metals," he said.

According to Agarwal, the Vedanta group is growing at a rate over 50 per cent for last couple of years.

"From just Rs eight crore turnover in 1987, we shall pay an income tax of close to Rs 2,200 crore in the country this year. This is going to be one of the highest income tax payment by anybody," he said. Commenting on Balco, Agarwal reiterated that the group is keen to buy back remaining 49 per cent stake in the aluminium outfit.

"We have already exercised the call option as mentioned in the agreement. But the government seems not interested. But this will not be a problem as Vedanta group has the management control," he said. Incidentally, Balco currently produces four lakh tonne from just one lakh tonne when Vedanta group acquired the outfit from the government.


Sterlite Gold Reports on Investigation Involving its Subsidiary AGRC

CNW, Toronto

30th January 2007

Sterlite Gold Ltd. (TSX:SGD) advises that Armenian governmental authorities are conducting an investigation of the Company's wholly owned subsidiary, Ararat Gold Recovery Company (AGRC), in connection with an ongoing case in an Armenian Court relating to AGRC's mining operations. As part of this investigation, the Armenian governmental authorities have requested the production of documents and frozen bank accounts of AGRC with total balances of approximately US$3 million. Whilst AGRC is co-operating with the Armenian authorities in the conduct of its investigation, AGRC and its legal advisors believe that the allegations made are without foundation and are unjustified. The Company will vigorously defend itself against any legal proceedings or claims that may be brought against it or AGRC.

Union Minister sympathises with anti-Vedanta Varsity villagers

Pioneer News Service, Puri

1st February 2007

Even as the residents of 22 villages are resisting the move for acquisition of 8,000 acres of their agricultural lands for establishment of the proposed Vedanta University near Puri, the Opposition parties, particularly the Congress, are trying their best to cash in over the people's wrath in the in forthcoming panchayat elections beginning from February 13.

However, the State Government is firm on its decision on setting up of the university and going ahead with the process of land acquisition by issuing notices to the villagers. The villagers, in their turn, have been refusing to receive the notices from the officials of district administration.

The highest amount of 1,240 acres of land is being proposed which is to be acquired in village Beladala near Puri town.

In the latest political move, the Congress organised a visit of Union Minister of State for Human Resource Development Mohammed Ali Asraf Fatimi to some villages to be affected by establishment of the university.

Fatimi, who officially came to review the working of the midday meal programme in schools, also chose to visit some villages where the Government has initiated the land acquisition process for the university. He met the agitating villagers and discussed the issue with them.

On his return to Puri, Fatimi made a statement opposing the establishment of the university. He argued that as many as 25 big universities could have been set up on those lands proposed to be acquired for the Vedanta University. He expressed his surprise that his Ministry has no information regarding establishment of such a big university.

He commented that at a time when the Orissa Government is unable to provide only 500 acres of land for establishment of a new Indian Institute of Technology in the State, it is going ahead with a proposal for setting up of a university on 8,000 acres of land.

The State has also not sought permission or clearance from the Union Ministry of Forest and Environment for establishment of the university.


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