…Anil Agarwal’s looming move from Namibia’s zinc to diamonds
It’s one of those deals that do not draw much attention from the onset, but Anglo America stakeholders will hope it is not too late to act if Indian mining tycoon Anil Agarwal executes his plan to become the company’s biggest shareholder.
But what are the real underlying reasons that could be fueling Agarwal’s lust for more control in one of the biggest global companies in the mining sector?
Speculators claim the grand plan of Agarwal is to move the diamond processing works to India in the future. This move, experts warned, could have dire consequences on the beneficiation schemes of both Namibia and Botswana and ultimately result in job losses.
Many market watchers have predicted that India will become the Eldorado of diamonds, after all more than 80% of the world’s diamonds are polished in India, mainly in the town of Surat in the Gujarat state.
Botswana’s Minister of Mineral Resources, Green Technology and Energy Security Sadique Kebonang, this week told The Patriot that any move to try and ship operations to India could upset ‘those involved’ but indicated that India’s 15% shareholding in De Beers gives it a voice when it comes to deciding the future of the company.
Botswana and De Beers formed Debswana, a company similar to Namdeb in Namibia.
Despite concurring that any push to move mass processing works to India could have dire consequences, he says Botswana’s shareholding gives it room to influence the future of the company.
These speculations has once more brought to the fore calls for African countries to diversify their economies instead of focusing only on minerals.
“We totally agree but to a certain extent such views are more sentimental when you carefully look at the actual situation on the ground. The world economy is structured in such a way that Africa is forced to remain a producer. The businesses on the other side acts like a cartel and that have made it tough to penetrate the market. It does not matter whether it is the oil, diamond or gold sector, only a very few players determines the price and value of commodities, they have perfected this for over 100 years,” said Kebonang.
Meanwhile, Professor Roman Grynberg from the University of Namibia, whose interests are Trade in commodities especially diamonds, said the shareholders’ agreement between both Botswana and Namibia protects them from any major shifts.
Grynberg was hesitant to label the sudden scramble for mineral resources by Indian conglomerates as a “revolution”.
“Indians have shown their interest in recent times whereby large Indian firms and people with deep pockets have been acquiring huge assets. But to say the reason for his[Agarwal] bid to become the majority shareholder is to move the processing works to India is a bit off the mark, if it were to happen than it will surely be in the distant future,” he said.
Grynberg said due to the magnitude of Anglo, moving some operations from one part of the world to the other will not be an easy process.
“It is a huge company which will require big money and big decision makers to push it through he said,” he said.
Like neighbors Botswana, Anglo is a key player for Namibia’s shining diamond industry, simply because Anglo’s wealth is inseparably intertwined with Namibia’s diamond sector and Anglo’s subsidiary, De Beers.
Vedanta Zinc International (VZI) is owned by India-based Vedanta Limited, a listed subsidiary of Vedanta Resources plc. Namibia’s Skorpion Zinc Mine which is located in Rosh Pinah is owned by Vedanta.
The future plan
Although the speculations are downplayed by some of the shareholders, the company could be facing an uncertain future because Agarwal is now in a position to push for major change, but his intentions are still secretive, leaving analysts to guess at the billionaire’s plans for the blue-chip mining institution.
Agarwal said that he plans to spend as much as £1.5bn (R27bn) to increase his holding, lifting his total position to about 20%.
The 63-year-old investor, who runs a mining empire including Vedanta Resources and Hindustan Zinc, said his interest in Anglo is a family investment and he doesn’t intend to make a takeover offer. But the unusual structure of the deal suggests that Agarwal won’t simply buy and hold.
Agarwal amassed his stake in Anglo through a mandatory exchangeable bond issued by his Volcan Investments unit and secured by Anglo shares. Effectively, he rents the shares until the bond matures in 2020 and doesn’t benefit much from a rising stock price, a sign to some analysts that Agarwal may force Anglo to break up or merge.
Agarwal repeatedly said this year that he doesn’t plan to be an activist.
Still, in 2016, he proposed merging Hindustan Zinc with Anglo, saying the combination was a “good match” and that “one and one wasn’t going to be two, but 11.” The proposal was quickly rejected by Anglo. Now the spurned suitor is the company’s largest owner.
Under UK takeover rules, Agarwal is prevented from making an approach to Anglo for six months. That restriction doesn’t apply to the target company if it wants to approach the potential acquirer. Agarwal would need to make a cash offer to all shareholders if he buys shares with 30% or more of the company’s voting rights.
Namibia and The De Beers Group of Companies last year signed a 10-year sales agreement for the sorting, valuing and sales of Namdeb Holdings’diamonds. The sales agreement is the longest ever signed between the two partners.
The agreement makes provision for an increase in rough diamonds made available for beneficiation in Namibia, with US$430 million of rough diamonds being offered annually to Namibia Diamond Trading Company (NDTC) customers.
As part of the agreement, all Namdeb Holdings’ Special Stones will be made available for sale in Namibia.
In addition, the agreement provides for 15 per cent of Namdeb Holdings’ run-of-mine production per annum to be made available to a Government-owned independent sales company called Namib Desert Diamonds Pty Ltd.