Anil Agarwal-owned Vedanta Resources (VRL), which has hired Standard Chartered Bank to raise funds for its Konkola copper mine assets, says it is engaging with several potential partners for both short-term funds and long-term equity financing for the Zambian project.
A Vedanta official said its commitment to optimising capital allocation and driving expansion is a key cornerstone of its strategy for the mines.
It will enhance value creation and operationalise the Konkola Copper Mines (KCM).
“We can confirm that Standard Chartered Bank is assisting Vedanta in its broader strategy to manage its capital structure and ensure the company has the funds to meet its obligations and continue its operations again.
"It is common practice for large corporations to engage with financial institutions for such purposes,” said a Vedanta spokesperson.
The company was responding to reports that Dubai-based fund International Resources Holdings (IRH) has offered to buy a 51 per cent stake in the Zambian project for $1 billion.
Vedanta Resources owns 80 per cent in the mining firm.
The company said it cannot disclose the names of partners or investors due to the sensitive stage these discussions are in.
While VRL is unlisted, its Indian subsidiary Vedanta Ltd is listed on the Indian stock exchanges.
Vedanta Ltd closed at ~377 a share on Tuesday. VRL owns 61.95 per cent stake in the Indian company.
Vedanta further said it is committed to Zambia and the Zambian people and is fully aligned with the country’s vision of producing over 3 million metric tonnes of copper annually in the next 10 years.
“The company is hopeful of a swift resolution of all pending matters in the Zambian high court.
"This process has already started with creditors’ meetings scheduled for May 24 and May 30,” the spokesperson said.
Analysts at CreditSights, a division of the Fitch group, said they are positively surprised by IRH’s $1-billion offer.
This exceeded their expectations and a successful sale would result in significant cash inflow for VRL and a huge positive for VRL’s dollar bondholders.
“However, we anticipate that VRL is unwilling to lose its majority ownership of KCM.
"This is given its track record of being very protective of its majority ownership in its assets.
"Also, improving operational visibility at KCM, continued strength in copper prices and KCM’s high-quality, large ore reserves could further raise VRL’s reluctance towards a majority stake sale,” said Lakshmanan R, an analyst with CreditSights.
The analysts said as IRH is reportedly only interested in acquiring a majority stake in KCM, it sees a low probability for the deal to go through with IRH.
“While we expect VRL to continue pursuing a minority stake sale in KCM, we think it could be challenging to entice buyers due to uncertain dividend prospects.
"This is due to KCM’s still-poor operating conditions at least for another 2-3 years,” Lakshamanan said in the report.
In September last year, Vedanta Ltd had announced plans to demerge the company into six separate listed firms.
The six independent listed entities would be Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta Ltd. It is expected to unlock value for Vedanta Ltd shareholders.
