Johannesburg - Exxaro Resources said it will exit a mining venture with Vedanta Resources as the group founded by Indian billionaire Anil Agarwal plans to develop a $630 million (R6.9 billion) zinc operation in South Africa.
Exxaro is bound by an agreement to remain a 26 percent shareholder in London-based Vedanta’s Gamsberg zinc project in the country until at least 2016, Hilton Atkinson, a spokesman for the Johannesburg-based company, said in an e-mailed response to questions.
It will seek to dispose of the stake later, he said.
Vedanta will build the $630 million mine in Northern Cape and a $152 million refinery for the steel-making ingredient in neighbouring Namibia, the company said November 13.
It needs a venture partner such as Exxaro, which is controlled by black South Africans, to meet the conditions of its mining permit, a requirement meant to narrow economic disparities created by apartheid rule.
“Exxaro divested from its zinc portfolio over the past two years,” Atkinson said, referring to the sale of the Rosh Pinah mine in Namibia and the closing of its Zincor refinery in South Africa.
“Our ultimate strategy is still to exit from zinc” completely, he said.
Exxaro will have to meet its financial obligations to the project until it decides to dispose of its stake, Kishore Kumar, chief executive officer of Vedanta’s zinc business, said in an interview near the project’s site.
Kumar will be replaced by Deshnee Naidoo, who joined the company November 10, Kumar said yesterday.
“The long and short of it is they have an obligation,” Naidoo said, referring to Exxaro.
“If they choose to exit at some point they still have to make right on the commitments.”
Exxaro hasn’t yet decided how it will fund the project, Atkinson said.
Gamsberg is one of the world’s largest undeveloped zinc deposits, Kumar said.
The price of metal, used to protect steel against corrosion, has climbed about 9 percent this year on the London Metal Exchange.
Kumar will relocate to India “early in the new year” and will remain within the group, he said.
Naidoo will be based in Johannesburg, she said. - Bloomberg News