Skorpion Zinc sold for N$5.27 billion

AFTER announcing in October 2010 that they would be divesting a number of non-core businesses, Anglo American plc announced that it agreed to sell its zinc assests to the Indian mining company Vedanta Resources. The sale will make Vedanta the largest producers of zinc and lead in the world.

Anglo American Zinc’s portfolio which includes Skorpion Zinc, Black Mountain mine, 74% interest in the Gamsberg project in South Africa and the Lisheen mine in Ireland, was sold for a total of US$1,338 million on an attributable, debt and cash free basis.

“The successful sale of Anglo American Zinc for US$1,338 million is testament to the high quality of the business and its management team. The agreement represents an important milestone in our strategy to focus on our core commodity businesses and on the delivery of our exciting near term growth from our US$17 billion of approved projects,” Cynthia Carroll, chief executive officer of Anglo American said in an interview.

“I believe the staff and management will benefit under the new ownership and with the development plans of Vedanta.” Of the total consideration, US$698 million relates to the Skorpion mine, US$308 million relates to the Lisheen mine and US$332 million relates to Anglo American’s 74% interest in Black Mountain Mining. In turn the chairman of Vedanta, Anil Agarwal, said that his company intends to rapidly develop the Gamsberg project which is the largest known zinc deposit of high quality in the world.

“Vedanta has consistently demonstrated a track record of successfully integrating and investing in its acquisitions, and we look forward to working with the high quality management team and employees of Anglo American Zinc, Exxaro and the local communities towards growing the business. We are committed, as we are throughout all our operations, to maintain the highest health and safety standards, and to the sustainable development of these operations,” he said.

The transaction is subject to customary regulatory approvals as well as competition clearance in the relevant jurisdictions. In addition, Exxaro Resources Limited, Anglo American’s black economic empowerment partner in Black Mountain Mining, holds a 26% interest in the company and has a pre-emptive right to match Vedanta’s offer in respect of this asset.

Completion of the transaction is expected to be in stages, with separate completion dates for Skorpion, Lisheen and Black Mountain Mining. Anglo American Zinc produced 350 000 tonnes of contained zinc in 2009, generating gross revenues of US$717 million. In 2009 Skorpion produced 150 kilo ton zinc worth US$236 million.

At the moment it is not known if the change in ownership will influence the workforce or the day to day activities at the mine. When the intent to sell was announced in October 2009, Anglo American said that the sale of Skorpion Zinc will be undertaken on a going concern basis and that the mine and refinery will continue to operate without any change in production levels or strategy.

“The sale is merely a transfer from one company to another, and the contribution to the Namibian economy by Skorpion should be largely unaffected by the transaction, apart from any effects of the sale process itself. Anglo American wishes to make it clear that the decision is based on a strategic review of Anglo American’s assets, particularly around participation in the zinc business, and is not in any way a decision regarding Namibia. Anglo American has had a positive and constructive relationship with the Government of Namibia for the duration of the development and operation of Skorpion Zinc and confidence in the country remains strong,” reads the press release.