Vedanta to invest $20bn on expanding Indian units

Vedanta Resources, the UK-listed mining group, is planning to invest $20bn in India in the next four years to expand its metals, mining and electricity generation operations in the country. The move by Vedanta, which controls Sterlite Industries, India's biggest producer of non-ferrous metals such as aluminium, copper and zinc, would follow recent acquisitions such as its $2.6bn takeover of US copper producer Asarco last month. Demand for copper in India was growing 8-10 per cent year-on-year, aluminium 10-12 per cent and zinc 13-14 per cent, Vedanta said. India produces 89 minerals and is one of the world's most resource-rich countries, ranking third in the production of coal, fourth in iron ore, sixth in bauxite - used to produce aluminium - and 10th in aluminium. "However, due to insufficient investments in mining and a limited role for the private sector, less than 10 per cent of the [Indian] land mass has been explored," Citigroup wrote in a recent report. Like Lakshmi Mittal, who controls ArcelorMittal, the world's largest steel producer, Anil Agarwal, chairman of Vedanta, is an Indian citizen who has built his international mining and metals empire from his base in London. With a fortune estimated by Forbes at $6bn, he is banking on growing demand for non-ferrous metals from India's automotive, power and consumer goods sectors to support his group's ambitious expansion plans. Vedanta is the biggest private sector group in India to try to exploit this opportunity, with targeted production of 1m tonnes each in its zinc, copper and aluminium operations. The company is planning to invest $8.8bn to meet these targets by expanding its smelting plants and mining operations for these metals, mostly in India. In the year ended March, it produced 396,000 tonnes per annum (tpa) of aluminium, and is commissioning a new 500,000 tpa smelter in India, with phase I, producing half this amount, to come on stream this fiscal year. Copper smelting capacity at the group's Indian, Australian and Zambian operations was about 400,000 tpa at the end of March, and is set to rise to 635,000 tpa after the acquisition of Asarco. Zinc production capacity as of March was 754,000 tpa with expansion projects in the pipeline that are expected to increase this to 1.065m tpa, and boost related production of silver more than fivefold to 16.1m ounces a year. The group is also expanding iron ore capacity at Sesa Goa, a mine in Goa, India, that it bought from Mitsui last year, by about double to 25m tpa. In addition to its mines and smelters, Vedanta is building a network of commercial power plants with generating capacity of 10,000 megawatts, which require an investment of about $10bn. Mr Agarwal said the $20bn planned investment was for organic growth only - the group's presence in emerging markets meant it could achieve high-growth by developing projects itself rather than by buying new assets. "We are not looking for acquisitions [except] where we can add value," he said. Vedanta plans to fund the development from a mix of cash and debt. It already has $5.5bn in cash on the balance sheet. Source: FT News