Mar 16 Nov 2010 16:14
On a les dates
To sell new, existing shares; to list in London, Lusaka
* To raise $1.1 billion for capital spending
* KCM unit seeks to double output to 400,000 tonnes by 2014
* Vedanta shares down 2.2 pct, mining sector falls 2.5 pct
(Adds interview, analyst comment)
By Eric Onstad
LONDON, Nov 16 (Reuters) - London-listed Indian miner Vedanta plans to float its Zambian copper business on the London stock exchange next month to unlock value in the unit estimated to be worth a total $6 billion-$7 billion.
The offering will consist of new and existing shares in Konkola Copper Mines (KCM), the second-biggest integrated copper producer in Africa, raising about $1.1 billion that KCM can use to boost output, Vedanta said on Tuesday.
A statement did not say what KCM was expected to be valued at in an initial public offering (IPO), but a newspaper report last month said a flotation could value it at 4 billion pounds ($6.46 billion).
Dominic O'Kane at Liberum Capital said 100 percent of KCM would probably be worth $5.7 billion, rising to $7.1 billion assuming the company was successful at increasing output.
KCM said it was aiming to more than double output to 400,000 tonnes a year by 2014, from 173,000 tonnes in Vedanta's financial year to the end of March 2010, and to cut integrated cash costs to below $1 per pound from $1.80.
"It will also provide another way for investors to get exposure to copper, which is relatively limited versus commodities such as gold. We would not be surprised to see a steep valuation," analyst John Meyer, at Fairfax investment bank in London, said.
Vedanta has an indirect stake of 79.4 percent in KCM, with the remainder held by ZCCM Investments Holdings, majority owned by the Zambian government. Vedanta will retain a majority of KCM, which will also be listed in Zambia's capital, Lusaka.
Vedanta's shares shed 2.2 percent by 1315 GMT, outperforming a 2.5 percent fall in the British mining index. The shares have underperformed the mining index by 27 percent this year after a series of setbacks to its growth plans.
ACQUISITIONS
The Zambian company was open to growing through takeovers in addition to its mine expansion programme, Kishore Kumar, chief executive of KCM's holding company Konkola Resources, told Reuters in a telephone interview from Zambia.
"The focus will be on organic growth for the initial few years. However, as opportunities present themselves, we will look at them and evaluate them, and where we see synergies we will embrace those," he said.
KCM also has potential for increasing its deposits through a strong exploration programme, Deputy CEO Jeyakumar Janakaraj added.
"We have significant upside in the numbers we have shown," he said, adding KCM was applying for large-scale exploration licences in Zambia's Northwest province.
KCM has 404.8 million tonnes of proved and probable mineral reserves, with contained copper of 6.52 million tonnes. It has 20,777 employees and third-party contractors, making it the largest private employer in Zambia.
Kumar said the listing was expected next month while a source close to the deal said final pricing was expected in mid-December.
If the listing followed usual timelines, a price range could be expected around Nov. 30, with final pricing around Dec. 15. Goldman Sachs and JP Morgan Cazenove are acting as joint sponsors and co-ordinators of the offer.
Vedanta said on November 11 it was working on possible listings of its Sterlite Energy and KCM units to release billions of dollars of hidden value after posting a weaker-than-expected jump in first-half profits.
