Vedanta sticks to Cairn deadline, eyes Zambia float

Vedanta sticks to Cairn deadline, eyes Zambia float

London: India-focused Vedanta Resources said strong demand for copper and zinc and rising prices lifted full-year core profit more than 55%, and said it remained positive on its much-delayed bid for Cairn India.

The miner’s earnings per share, however, came short of analysts’ expectations at 283 cents, up 29 percent, tarnished by an asset writedown and acquisition costs related to Cairn India and Anglo American’s zinc operations. Analysts polled by Thomson Reuters had expected EPS of 321 cents.

Vedanta, which is transforming itself into a full-fledged diversified miner with its move into oil and gas, also said it was continuing to work with advisors on a potential listing for its Zambian copper operations this year, but set no date.

Vedanta will be capitalising on strong demand for assets in Africa’s copper belt, as seen in the bid battle for Canada’s Equinox, which has large Zambian operations.

China, which accounts for 40 percent of the world’s demand for copper, is chasing mining assets as prices for the red metal hover near record highs, but Vedanta said it had not held talks with individual buyers over a direct stake sale.

Minmetals, whose bid for Equinox was trumped by Barrick Gold, has said it is still in the hunt for assets with copper a prime target.

“We are evaluating this (IPO) opportunity, and are holding discussions with the bankers," Vedanta chief executive M. S. Mehta said on a conference call with reporters.

“Until (we have confirmed) the IPO launch, we cannot hold private placement discussions with anybody.

Vedanta’s Zambian copper operations more than doubled core profit in the year to the end of March, rising to $440 million.

Vedanta said it had seen strong growth particularly for zinc, one of its key revenue drivers, as global consumption rose 14.8% in the year, though that is expected to slow with demand from Asia, excluding China, easing to around 7%.

It expects tight supply in zinc and copper, where demand is forecast to grow around 5% per year.

Zinc, which accounts for over a third of Vedanta’s core profit, saw earnings before interest, tax, depreciation and amortisation (EBITDA) rise 34.5%.

Iron ore production has suffered from supply problems in India, including an export ban in the state of Karnataka, an extended monsoon in Goa and the end of a mining agreement in Orissa. Vedanta said it was expecting the Karnataka ban to be resolved “soon".

Sticks to Cairn deadline

The group posted a 28% rise in full-year attributable profit to $770.8 million, on the back of a 44.1% rise in revenues to $11.4 billion. Ebitda rose to $3.6 billion.

Vedanta shares were down 0.6% at 0755 GMT at 400p, underperforming a 0.6% rise in the broader mining index.

“Vedanta have this morning reported full year results that are in line with our estimates at the group Ebitda level," analysts at Liberum said in a morning note.

“The outcome of the Cairn India acquisition approval process remains the key share price driver."

Vedanta’s earnings currently depend largely on iron ore, copper and zinc, but the group has pursued a strategy of diversification and could get as much as a quarter of its profits from oil and gas in three years, if it succeeds in its bid to take control of Cairn India.

“All stakeholders are keen to close this transaction as soon as possible ... We remain positive that this will get closed before the (20 May) deadline," Mehta said.

Vedanta, which made the offer for Cairn’s Indian unit last year, has been caught up in a dispute over royalty payments, and the two sides have been waiting for government approval for almost nine months.