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In spite of stiff competition from rivals, Anil Agarwal-run Vedanta Resources has finalised a deal with London-based Anglo American for the company's entire zinc business in Ireland and Africa for $1.338 billion. Anglo-Swiss mining giant Xstrata and China Metallurgical were also eyeing Anglo American Zinc."Vedanta Resources and Anglo American have signed a definitive share purchase agreement under which Vedanta, through one of its controlled group companies (Hindustan Zinc), will acquire Anglo American Zinc for a total consideration of $1.338 billion," the company said in a statement here. The buyout will be funded entirely through cash. As on March 31, 2010, Vedanta had cash, cash equivalents and liquid assets of $7.2 billion.The deal will be completed in the next 12 months, making it the world's largest zinc and lead producer, the company said. "These assets complement our existing portfolio, creating the largest zinc and lead producer in the world," Vedanta Resources chairman Anil Agarwal said. The acquisition will increase the company's annual zinc and lead capacity by 37 per cent to 1.4 million tonne, representing 11 per cent of the global zinc market, vice chairman Naveen Agarwal said during an analyst conference call later in the day. At present, Vedanta has an annual zinc output of 1.06 million tonne.Anglo American Zinc comprises the Skorpion mine in Namibia, the Lisheen mine in Ireland and a 74 per cent interest in Black Mountain Mining in South Africa, which holds 100 per cent of the Black Mountain mine and the Gamsberg project. Of the total consideration, $698 million relates to the Skorpion mine, $308 million relates to the Lisheen mine and $332 million relates to Anglo American's 74 per cent interest in Black Mountain Mining.Following the announcement, the Vedanta counter surged 10.45 per cent to 2,558 pence on the London Stock Exchange. The transaction is subject to customary regulatory approvals as well as competition clearance in the relevant jurisdictions. In addition, Exxaro Resources Limited, Anglo American's black economic empowerment partner in Black Mountain Mining, holds a 26 per cent interest in the company and has a pre-emptive right to match Vedanta's offer in respect of this asset. Completion of transaction is expected to be in stages, with separate completion dates for Skorpion, Lisheen and Black Mountain Mining"The acquisition will further consolidate and strengthen our position in Africa and Europe," Agarwal added. Vedanta sees the prices of zinc — which it currently sees at around $2,200 a tonne — to rise on increasing demand and cost of production. He said the firm is looking at various "debottlenecking" opportunities to cut cost at Anglo-American Zinc's assets. Anglo American chief executive Cynthia Carroll said, "This agreement represents an important milestone in our strategy to focus on our core commodity businesses and on the delivery of our exciting near-term growth from our $17 billion of approved projects."
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