Vedanta buys Zambia mine

The Anil Agarwal-controlled Vedanta Resources has struck a deal with the promoters of the Konkola Copper Mines Plc. (KCM) in Zambia to take over the management control of the 2 million tonnes per annum copper company in an all-cash transaction worth $48.2 million (approximately Rs 224.13 crore).

According to the deal, Vedanta will buy out a sizeable stake of Zambia Copper Investment (ZCI), one of the promoters of KCM, and will also subscribe to fresh shares to be issued by the Zambian firm.

Vedanata's holdings, after the two-pronged acquisition of shares, will go up by 51 per cent. The deal is expected to be completed by October, 2004, and is subject to the approval of ZCI shareholders. ZCI currently holds a 58 per cent stake in KCM.

The deal will catapult the Agarwal group among the top five copper refining groups in the world. The first three copper refining companies in the world are Codelco of Chile, Phelps Dodge of the US and Grupo Mexico.

KCM has a mining capacity of 2 million tonnes, which will be increased to 3 million.

"The capacity expansion will be done through technological improvement and de-bottlenecking of plants," a Vedanta source said.

In a statement to the press, Anil Agarwal, chief executive of Vedanta, said, "We have been negotiating with the KCM shareholders and the government of the Republic of Zambia for a considerable time. The outlook for copper demand remains positive over the medium-term and our immediate task will be to stabilise the existing assets and enhance production."

KCM's net assets as on December 31, 2003, were $325 million, which will be subject to fair value adjustment following completion of the acquisition. After the issue of the new equity shares to Vedanta, KCM will have a net debt of around $5 million.

Vedanta has also agreed to underwrite and fund any cash flow shortfalls at KCM up to an aggregate limit of $220 million over a period of nine years from the completion of the transaction.