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Vedanta poised to float Zambian copper arm in $7.3bn IPO

Author: Lawrence Williams

Indian controlled and London listed diversified miner, Vedanta is reported to be poised to float off Konkola Copper Mines, its major Zambian copper producer for around US$7.3bn.

Vedanta bought an initial 51% stake in Konkola Copper Mines in 2004 for a paltry US$261m, and subsequently increased its holding to the current 79.4% with the Zambian Government holding the balance, so an IPO valuing the company at over $7bn represents a huge gain for the multinational, founded and controlled by Indian entrepreneur Anil Agarwal.

A report in the UK’s Sunday Times suggests that multinational London listed diversified miner, Vedanta, is to float off its Zambian copper arm valuing it at £4.5 billion (US$7.3 billion) in a London IPO in as soon as one month’s time.

Vedanta itself is London listed with its major mining interests in India and Africa. The reports say that Vedanta has hired J.P. Morgan and Goldman Sachs to advise it on an offering and is said to be aiming for a June listing.

The British newspaper points out that following the huge Glencore float there are fears that the stock market may have peaked and that there are companies with planned IPOs, of which Vedanta is one, who are now rushing to push these through before the market turns down.

Vedanta bought an initial 51% stake in Konkola Copper Mines in 2004 for a paltry US$261 million, and subsequently increased its holding to the current 79.4% with the Zambian Government holding the balance, so an IPO valuing the company at over $7 billion represents a huge gain for the multinational, founded and controlled by Indian entrepreneur Anil Agarwal.

The company is the largest producer of copper and cobalt in Africa’s largest copper-mining nation and has a stated aim to become one of the world’s top ten copper miners in its own right.

Its Zambian properties are comprised of four mines, one at Konkola, two at Nchanga and one at Nampundwe, a tailings leach plant at Nchanga and a smelter at Nkana. Production of copper cathode was 507,000 tonnes in fiscal 2010. Production increases, together with higher copper market prices, enabled revenues to reach $3.8 billion in 2010.

Konkola is currently undertaking key projects to extend life of mine and increase copper production. Most important among these is the Konkola Deep Mining Project (KDMP). This project is aimed at expanding the production of copper ore at Konkola Mine from two million tonne/year to 7.5 million tonne/year by accessing the rich ore body that lies beneath what the current operations have been exploiting. This involves the sinking of a new mine shaft to the depth of approximately 1,500 metres, the deepest new shaft sinking project in Africa. In addition, the project involves the deepening of an existing shaft, sinking of three new ventilation shafts, one dewatering shaft and the construction of a new pump chamber. Phase I of this project has been launched and mid-shaft loading is currently underway.

Alongside the KDMP, a modern concentrator is being built to handle the additional ore that will be produced. Cost of this development is approaching $1 billion with the bottom shaft completion scheduled for later this year.