Exxaro looks to exit Vedanta zinc mine

EXXARO Resources would exit a mining venture with Vedanta Resources, it said, as the group founded by Indian billionaire Anil Agarwal planned to develop a $630 million (R7 billion) zinc operation in South Africa.

Exxaro was bound by an agreement to remain a 26 percent shareholder in Londonbased Vedanta’s Gamsberg zinc project in the country until at least 2016, Hilton Atkinson, a spokesman for the company, said on Tuesday.

It would seek to dispose of the stake later, he said.

Vedanta would build the $630m mine in the Northern Cape and a $152m refinery for the steel-making ingredient in neighbouring Namibia, the company said last week.

It needs a venture partner such as Exxaro, which is controlled by black South Africans, to meet the conditions of its mining permit, a requirement meant to narrow economic disparities created by apartheid rule.

“Exxaro divested from its zinc portfolio over the past two years,” Atkinson said, referring to the sale of the Rosh Pinah mine in Namibia and the closing of its Zincor refinery in South Africa. “Our ultimate strategy is still to exit from zinc” completely, he said.

Exxaro would have to meet its financial obligations to the project until it decided to dispose of its stake, Kishore Kumar, the chief executive of Vedanta’s zinc business, said near the project’s site.

Kumar would be replaced by Deshnee Naidoo, who joined the company on November 10, Kumar said on Tuesday.

“The long and short of it is [Exxaro] have an obligation,” Naidoo said. “If they choose to exit at some point they still have to make right on the commitments.”

Exxaro is bound to remain a 26 percent shareholder in Vedanta’s Gamsberg zinc project until 2016.

Exxaro had not yet decided how it would fund the project, Atkinson said.

Gamsberg was one of the largest undeveloped zinc deposits, Kumar said. The price of the metal, used to protect steel against corrosion, has climbed about 9 percent this year on the London Metal Exchange.

Kumar would relocate to India “early in the new year” and remain within the group.

Exxaro lost 2.28 percent to R112.40 yesterday. – Bloomberg