Vedanta sells Sterlite Gold for $86m
Vedanta Resources, the Anil Agarwal-led mining major, has sold its 84.2% stake in Sterlite Gold to Georgia’s GeoProMining for $86 million.
By Prince Mathews Thomas & Boby Kurien, TNN |
MUMBAI/BANGALORE: Vedanta Resources, the Anil Agarwal-led mining major, has sold its 84.2% stake in Sterlite Gold to Georgia’s GeoProMining for $86 million. The Canada-listed Sterlite Gold’s main assets include gold mines in Armenia.
The deal comes a year after Vedanta acquired Sterlite Gold for around Rs 300 crore, a step believed to be in line with the LSE-listed group’s global ambitions. But problems with the local government are believed to have led to the group’s exit from Armenia.
GeoProMining had made an all-cash offer to Vedanta Resources at a price of $0.3845 per share of Sterlite Gold, amounting to $86 million. “In addition, GeoProMining has agreed to repay Sterlite Gold’s debt of around $25 million to Vedanta Group companies. The carrying value of Vedanta’s investment in Sterlite Gold was $83 million on June 30, 2007,”said a source.
Vedanta Resources officials could not be reached for comments. GeoProMining is the parent company of Georgia’s largest mining firm Madneuli.
Its main operations include ore mining as well as processing of copper gold-bearing ore. It recorded revenues of over $100 million last year. Russia’s Industrial Investors Group was among the other interested parties to acquire the stake in Sterlite Gold.
The transaction, in which Vedanta was advised by Ernst & Young and Blake, Cassels & Graydon, will give the Georgian company access to two gold mines and a processing plant.
Sterlite Gold’s Armenian assets are controlled by its subsidiary Ararat Gold Recovery Company.
The deal comes a year after Vedanta acquired Sterlite Gold for around Rs 300 crore, a step believed to be in line with the LSE-listed group’s global ambitions. But problems with the local government are believed to have led to the group’s exit from Armenia.
GeoProMining had made an all-cash offer to Vedanta Resources at a price of $0.3845 per share of Sterlite Gold, amounting to $86 million. “In addition, GeoProMining has agreed to repay Sterlite Gold’s debt of around $25 million to Vedanta Group companies. The carrying value of Vedanta’s investment in Sterlite Gold was $83 million on June 30, 2007,”said a source.
Vedanta Resources officials could not be reached for comments. GeoProMining is the parent company of Georgia’s largest mining firm Madneuli.
Its main operations include ore mining as well as processing of copper gold-bearing ore. It recorded revenues of over $100 million last year. Russia’s Industrial Investors Group was among the other interested parties to acquire the stake in Sterlite Gold.
The transaction, in which Vedanta was advised by Ernst & Young and Blake, Cassels & Graydon, will give the Georgian company access to two gold mines and a processing plant.
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Sterlite Gold’s Armenian assets are controlled by its subsidiary Ararat Gold Recovery Company.
The acquisition of Sterlite Gold was seen as an important step in Vedanta group’s five-year roadmap to become one of the top three mining majors globally. The $7-billion group has major copper, zinc and aluminium assets in countries such as Zambia and India.
Earlier this year, the group made its maiden entry into the iron ore mining industry by acquiring Sesa Goa for almost $1 billion.
The local government in Armenia this year had rejected Sterlite Gold’s $100-million project to set up a gold processing plant. According to the filings posted by Sterlite Gold on its website, the Armenian government later slapped the company with penalties and fines amounting to over $50 million (Rs 200 crore).
“According to the study conducted by Sterlite Gold, the two sites have gold reserves of over 2 million ounces, which at present prices are worth $1.3 billion,” a source had then told ET.
“But the Armenian government wanted to change the terms in the pact it signed with Sterlite Gold in 1998 under its previous owners,” he added. Though the specific issue concerning the dispute could not be ascertained, “the quasi-dictatorial government wanted its own pound of flesh,” according to sources.
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The development, add industry observers, once again reflects the risks involved in having operations in politically-sensitive geographies. The Armenian government has been in the news recently for its nuclear ties with Iran. Other Indian companies such as Jindal Steel and Power and Tata Steel had faced similar problems in Bolivia and Bangladesh recently.Start a SIP with as low as ₹500 with ET Money App!
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