Vedanta Resources, the India-focused mining group, yesterday reaffirmed its position as the world's biggest zinc producer when it paid $1.34bn (£893m) for Anglo American's assets in Africa and Ireland.
London-listed Vedanta was one of a number of companies interested in the South African, Namibian and Irish mines – a factor that pushed the price up beyond the level that many analysts considered fair value. The market reacted well to the agreement, with both companies' shares rising by more than 10 per cent.
The deal will give Vedanta, which paid for the assets in cash, 11 per cent on the global zinc industry. The price of the metal on the London Metals Exchange has soared by more than a third since it was trading at an average of $1,595 per tonne last year.
Mining analysts had suggested that Anglo's assets would fetch about $1bn, but interest from a number of other companies, notably Xstrata and the Swiss commodity trading group Glencore, pushed up the price.
"While the price looks full for most third parties, we believe the assets make an outstanding strategic fit for Vedanta, which has a large cash pile sitting within Hindustan Zinc, already has the smelting capacity available for the new sulphide projects Gamsberg and Gergarub, and post-acquisition will make up 11 per cent of the global zinc market," said Michael Rawlinson, of Liberum Capital.
Vedanta said the transaction consolidated its position as the world's largest integrated producer of zinc and lead and it expected to make a return on its investment within three years.
For Anglo American, the sale marks another stage in the transformation of the company. Last October, its chief executive, Cynthia Carroll, said the miner would sell its non-core assets, including the zinc business, after investors rejected a merger approach from Xstrata. Sir John Parker, then the new chairman, promised a review of the company in return for Anglo remaining independent.
Ms Carroll said of yesterday's sale: "This agreement represents an important milestone in our strategy to focus on our core commodity businesses and on the delivery of our exciting near-term growth from our $17bn of approved projects."
Vedanta's purchase substantially increases its interests outside India and attention will undoubtedly turn to the miner's environmental and human rights record. A number of its high-profile investors, such as the Church of England and the Norwegian state pension fund, have recently criticised the group's ethical reputation.
Specifically, Vedanta was attacked over the safety of its alumina refinery in Lanjigarh in India's Orissa state, and its planned bauxite mine at the nearby Niyamgiri mountain. The rights group Survival International claims the mine will destroy forests, while the mountain is considered sacred by tribes.
Anglo said yesterday it would continue to invest in communities near the mines it is selling: the Skorpion site in Namibia, Lisheen in County Clare in Ireland, and its Black Mountain and Gamsberg projects in South Africa.
Vedanta did not comment on any sustainability investment it may make, but its chairman, Anil Agarwal, said: "We look forward to working with the high quality management team and employees of Anglo American Zinc ... and the local communities towards growing the business.
"We are committed ... to maintaining the highest health and safety standards, and to the sustainable development of these operations."