Vedanta Resources announced in late February it will consolidate all of its diverse natural resource holdings, with the exception of Konkola Copper Mines in Zambia, into a single group to be called Sesa Sterlite. Vedanta has a 79.4% interest in Konkola and will continue to hold that interest directly.
Sesa Sterlite will be formed through the merger of Sterlite, owned 54.6% by Vedanta, into Sesa Goa, owned 55.1% by Vedanta. All other Vedanta natural resource holdings, again with the exception of Konkola, will be rolled into Sesa Sterlite. When all of the shifting of interests is complete, Vedanta will hold a 58.3% interest in Sesa Sterlite.
Sesa Goa is India’s largest private-sector iron ore producer and exporter, with current production of about 19 million mt/y. Sterlite is India’s largest nonferrous metals and mining company and has its primary interests in aluminum, copper, zinc and lead, and commercial energy.
Sesa Sterlite will be organized into four divisions: iron ore, copper smelting, aluminum, and power. Other holdings will be organized as subsidiaries of Sesa Sterlite. (Editor’s note: All percentage interests cited in the remainder of this paragraph refer to Sesa Sterlite interests.) These subsidiaries will include: Hindustan Zinc in India (64.9%, with an option to increase to 94.4%); off-shore zinc producers Skorpion Zinc in Namibia (100%), Lisheen in Ireland (100%), and Black Mountain in South Africa (75%); Bharat Aluminum in India (51%, with an option to increase to 100%); the Western Cluster iron ore development project in Liberia (51% with an option to increase to 100%); Copper Mines of Tasmania (100%); Talwandi Sabo Power (100%); VAL Power and Malco Power (100%); and Cairn India, an oil and gas explorer and developer focused on India (58.9%).
Vedanta’s goal is for Sesa Sterlite to be the world’s seventh-largest diversified resources company and India’s first global resources company. Sesa Sterlite will be listed in India, with American Depositary Shares listed on the New York Stock Exchange. Pro forma EBITDA in for the combined company in 2011 would have been $5.3 billion and earnings would have been $2.4 billion. Synergies are expected to generate cost savings of about $200 million per year.
The proposed transactions will require numerous shareholder and regulatory approvals. Vedanta expects the formation of Sesa Sterlite to be complete by year-end 2012.