Sage Investment Club

NEW DELHI Acquisition of Vedanta’s overseas zinc assets (mines) –in Africa -will help “inorganic” growth of Hindustan Zinc and ensure its presence globally, including major consuming markets of Europe, the USA and the Middle East. According to Arun Misra, Chief Executive Officer, Hindustan Zinc, the company put together “will be controlling a large part of the global market”. Post $2,981 million acquisition of the mines in Africa, the Hindustan Zinc’s resource base gets doubled to 2 million tonnes with 1 mt from India and 1 mt in South Africa. “And with this kind of capacity, we will be in India and Southeast Asia; Africa would be more on the US and Europe territory or Middle-East territory. So, with that put together, we will be controlling a large part of global market,” Misra said at the analyst concall. “If I look at it in other way, Hindustan Zinc controls almost 31 mt of resource base (is available) with , market cap of about $17 billion to $18 billion… ,” he added pointing out that it will help “drive growth inorganically by creating substantial synergies and unlocking values”.
African mines expansion
Explaining the strategic rationale behind the acquisition, Misra said, “it is not possible” for Hindustan Zinc to grow to 2 mt with Indian resources. Indian operations are stagnating at 1 mt and at most are being expanded to 1.2 mt. And on top of that there are not new zinc mines that has been opened up here in the country. “Traditionally for the last five years, we have been stagnating at around 1 million tonne only, and for last about two, three years we have been following up. There has been no new zinc mine that has been opened up or put up for option in India. World over, there is no more such property of that size available for acquisition. So, in that case, this makes a right choice for Hindustan Zinc to grow,” he said. According to Misra, mines are located in Gamsberg and Aggeneys in South Africa producing about 300,000 tonnes of metal in concentrate.“The projects are on just now as we speak for expansion of Gamsberg mine, to take it to 600,000 tonnes in two years, doubling the capacity, and also looking to put up a smelter and restart the smelter in Namibia property,” he added. A third phase of expansion will be carried out by adding another 400,000 tonnes.
Funding Plans
Acquisition will be largely funded through internal accruals. And it would be completed over an 18 month period, with payment being made in tranches; and “lots of the payments will go in the next three– to– six months”. Shareholder approval is expected by February-end. “If you see like $2.4 billion is the immediate cash consideration, and Hindustan Zinc is sitting on ₹16,500 crore,” he said during the concall.SHARE
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