The Vedanta group-controlled Hindustan Zinc is gearing up for one of the biggest copper mines overseas acquisitions by an Indian company. The investment involved is supposed to be $2 billion.
To partially fund the acquisition, the company may come out with a follow-on offering in the next year.
Sources in the Vedanta group said HZL had initiated discussions with the government of Congo for acquiring an unexplored copper mine with an estimated reserve of more than a billion tonne.
A high-level team from Congo also met HZL officials recently in this connection.
The acquisition will mark the beginning of HZL's overseas foray as well as its entry into the copper sector.
Hindustan Zinc currently owns five zinc mines in Rajasthan.
According to the sources, the government of Congo is keen on the deal, as the civil war had hit the economy of the central African country severely.
"There is a civil war but the Congo authorities have assured the group about the operation would be safe. Now, the discussions are at the highest level. The Congo government will get a royalty from this copper mine," the sources further said.
The sources said the deal was likely to be finalised in another 4-5 months.
"HZL is likely to invest close to Rs 9,000 crore (Rs 90 billion) in the project over the next couple of years. It is a virgin area so it has to set up the infrastructure like smelter plant and associated infrastructure.
The smelter plant itself requires an investment of Rs 2,000 crore (Rs 20 billion)," added sources.
According to the sources, the overseas acquisition would be mainly funded through internal accruals.
However, the Hindustan Zinc did not ruled out the possibility of a follow-on offering to partially fund the project.
HZL reported Rs 2,172 crore (Rs 21.72 billion) net profit in the first half of 2006-07 and had reserves of over Rs 3,000 crore (Rs 30 billion).
The HZL scrip was hovering near Rs 915 after touching a high of Rs 1119 three months ago.
"If it comes out with a follow-on offering then the company can command huge premium with the kind of financials," a market expert said.
The Vedanta group holds close to 65 per cent in the outfit through Sterlite Opportunities and Ventures.
