Vedanta Resources is a diversified and integrated metals and mining group with annual sales of $1.9bn. Its principal operations are located in India, where it has a major market share in each of our main metals: aluminium, copper, zinc and lead. There are also substantial copper operations in Zambia and 2 copper mines in Australia.

            Red = 25 day moving average.           Green = 200 day moving average.

                        

Copper - (6 month graph)

SALES PER ACTIVITY (Data as of 31/03/2006)

Copper:      60%
Zinc:         24%
Aluminium:  12%
Others:       4%

I know the feeling Stan.

But now the price has got over the 14 mark, I'm going to stay put.

KD.

Me to...I think, trouble Is I seem to change my mind with this lot every time I give It more thought -:)

Suppose I should just stop thinking-:)

Out at last, sold the lot...needless to say It ticked up a few just after!

Profit's a profit.

Yep true enough K, by the way lots of Interesting rather large buys In the after 4.30 finish I see.

Could be a very rewarding session for all you holders tomorrow.

Good luck all.

Vedanta Resources PLC announced a slew of projects that is expected to enable Zambia's Konkola Copper Mines (KCM) to nearly treble its copper production.

The projects will allow KCM, in which Vedanta holds a 51 pct stake, to raise output from 2.4 mln tonnes to 6 mln tonnes thus extending its lifespan to 2035, KCM chairman Navin Agarwal said.

'The total investment in these projects is 750 million dollars. This is the single largest investment in Zambia to date,' Agarwal said.

He said KCM has awarded contracts to several international firms to develop the untapped Konkola Deep Mining Project (KDMP), as well as construct a new smelter and acid plant which will be completed in 2009.

The new smelter plant will produce 250,000 tonnes of copper while an acid plant will manufacture 1,700 tonnes of acid per day, Agarwal said.

'KCM will have created the capacity within Zambia to treat all the copper concentrate that will be produced by other stand alone copper mines, thereby enabling the country to export value added finished copper rather than exporting raw material concentrate,' Agarwal said in a statement.

KCM is Zambia's largest mining company with a work force of 10,000 workers.

Vedanta Resources is a London-listed Indian mining group which bought 51 pct stake in KCM in November 2004, two years after South African mining firm Anglo American Corporation withdrew from KCM.

Big Mining Is Big Value - By Alun Morris


I don't often buy large cap shares. I prefer to stay away from the thousand Watt arc lamps of multiple broker analysis and take my flashlight around the darker corners of the market.

However this month I bought a share in a sector that looks so cheap that I couldn't keep my grasping value hands off it any longer. I have been mulling a move on big mining since UK investing legend Jim Slater said in February that mining shares were cheap. In fact he thought the rating of this sector was one of the most serious mis-pricing of markets he had ever seen, showing high growth and low P/Es. Being fully invested I didn't buy. Besides, these huge companies have more analysts than Woody Allen, so where's my edge?



Why are big miners so cheap?

This sector is cheap for a reason. Metal prices have run up a hill that's got steeper and steeper and we don't know if there's a cliff at the end. Copper, nickel and zinc have doubled or trebled in the past year, largely due to rapid growth and construction spending in China and India. Many see it as yet another bubble with prices overshooting due to speculation. The futures market is predicting significant falls in prices next year. Demand would fall if the Chinese or Indian economies stumble..

The bull arguments are:

* The same was said about oil last year but the futures market is now predicting $70+ oil until 2011.

* New mines take six to seven years to enter production, so the recent rush to start new mines will not give a big supply boost until the end of the decade.

* Chinese growth seems to be underpinned by endless demand for ever cheaper consumer goods.

I believe that mining shares offer the same opportunity that the oil and gas sector did a year ago -- their prices considerably lag the rise in the commodities they produce.



So which is the cheapest?

An excellent Metals and Mining report from Deutsche Bank this month looked at seven UK listed shares. The table below has excitingly low ratios, especially cashflow, and uses Deutsche's estimates adjusted for Wednesday's prices:

                       2007 P/E
Anglo American      9.2
Antofagasta          7.1
BHP Billiton            8.2
Kazakhmys            6.5
Lonmin                11.4
Rio Tinto               8.4
Vedanta                7.2



see article and table in full here


Cash

Cash, cash, cash! Music to my ears. The sector has more cash than it knows how to spend, hence the very low P/CF and EV/EBITDA figures. I decided to buy Vedanta -- it has the lowest 2007 cashflow ratios and nearly the lowest P/E. These reflect forecast output growth of 48% over the next 3 years., far higher than the others at about 5% to 25%. Jim Slater likes it too -- in a talk in June his picks were BHP Billiton and Vedanta.

Be prepared for a bumpy ride. These shares will often move two or three times as much as the FTSE-100 in a day. If you can stomach this and the risk of a slump in copper prices (and the forecasts already assume some decline), Vedanta looks the cheapest of the bunch.

Broker Recommendations;

Deutsche reiterates buy Vedanta Resources with a 16.60 target.

Merrill says buy Vedanta Resources - rated at over 22.

Morgan Stanley has overweight on Vedanta Resources (2300p target).

Citigroup has a buy rating and 22 for Vedanta Resources.

JP Morgan - Vedanta was kept "overweight" with a price target of 1,965p.

Vedanta has been initiated as a buy by ABN Amro with a target price of 1850 pence.

Goldman Sachs said it believes Vedanta remains the best 'buy' idea in the sector, as the group offers 62% potential upside to its target price.

Sold the rest of my holding last Wednesday at 14.12 after reading the comments in Shares magazine which stated that there isn't that much movement to be expected from now on. I actually agree with that feeling - after all the stock rose from 3 to 18 pounds - then seemed to balance itself out around 14.
I believe that the high expectations of China/India demand are incorporated within the current price.
Anyone agrees?

Vedanta by any valuation is inexpensive.

The main issue or concern is the excessively large shareholding by Chairman Anil Agarwal. Institutional Investors are nervous since Agarwal still dominates all company decision and direction giving rise to other investors being at the mercy of his idiosyncratic behaviour.

There is rumour of a negotiation / deal in progress to reduce his shareholding to be taken up institutionals thus reducing the risk of strategic error, but Agarwal so far has been reluctant and has endeared himself to his Mogul image. He remains in unassailable control.

Some have already dipped in some are waiting on the sidelines. Profits have rsien by more than 10 times and so has the EPS. With a PEG of 0.11 there is no substantiation that this price has 'topped out'. The share price still has some way to go on current valuation, corporate strategy and economic demand.

A London Calling Special - January 10 2004


The good business burghers of London are bolstering a newly launched enterprise with a distinctly shady recent past. The Vedanta mining company began trading on the Stock Exchange in December, its shares deliberately priced to the middle of the market. It was Britain's second biggest public float of the year and a first for any Indian-based company. The initial response was pretty impressive. True, the key buying seemed to be by hedge funds (slightly more US-based than British) and these are as swift to offload stock as to acquire it. Although the shares were placed with some 350 institutions, just 30 of these were believed to account for 70% of the uptake.

One or two commentators expressed misgivings. First, Vedanta is ostensibly controlled by Sterlite Industries, a major Indian conglomerate which is the holding company for Anil Agarwal, an NRI (Non-Resident Indian) based in London. Last year, Agarwal tried to de-list his company from the Mumbai (Bombay) stock exchange then buy back its shares at only half the book value. The Indian authorities firmly told Agarwal where he couldn't go. Second, Agarwal was recently found guilty of unfairly sacking a former senior employee, hired to work on Sterlite's mergers and acquisitions.

Rajat Bhatia had dared express his belief that Sterlite's proposed dilution of equity in an Australian company contrary to an existing understanding, would breach Australian rules. Agarwal literally threw his digital diary at Bhatia and threatened to "destroy him", understandably prompting the startled guy to resign. The British Employment Tribunal awarded Mr Bhatia 805,000 damages - the highest amount it's ordered in the past year.

But the majority of London's brokers scarcely blinked at Mr. Bhatia's plight, nor the growing indication that Anil Agarwal might have lots more skeletons in his corporate cupboard. After all there's no better time than the Xmas silly season (with office booze flowing as freely as the Thames), to bring off a massive confidence trick. The London "Times" on December 10th quoted a London stock exchange source confirming that Vedanta's listing had succeeded "only after a 'quiet word in many ears'". One wonders how many brains between those ears were truly attentive at the time.

What London investors did baulk at, however, was a nifty trick which Vedanta pulled at the thirteenth hour: a characteristic Sterlite gambit. Shares had closed on December 5th significantly below their initial price. The "Times" thought the sharp fall "reflected concerns that shareholders would receive a smaller slice of the company than they were previously led to believe."

Vedanta then suddenly increased the size of its offering by nearly a fifth. One major finance institution accused the company and its lead bankers, JP Morgan and HSBC, of "straightforward greed". A prominent fund manager called the offering " very badly handled", claiming "it could take months for the share price to recover". One leading shareholder described the company's debut as "the worst flotation of its size since...early 2001", while an analyst at Numis Securities revealed that "a lot of the institutions are very angry at the sheer size of the new issue. It looks as if the investment banks are trying to get extra fee income".

In addition to JP Morgan and HSBC, the other jackdaws picking over Vedanta's pearls are Cazenove (ironically dumped by HSBC as its own house broker back in September); Citigroup, the world's biggest financial services company; Australia's Macquarie Bank; and India's homegrown ICICI Securities. Between them, they're expected to reap about thirteen million pounds in fees.

By mid December the new mining company had already sold more than half a billion pounds worth of new shares, giving it a market capitalisation of well over a billion and ensuring a high position in the FTSE 250 index. Agarwal and his family now control nearly 54% of Vedanta and Agarwal himself boasts it will soon become the biggest non-ferrous metals producer anywhere. (More modestly the Financial Times reckons Vedanta may fill the investment gap between the Big Global Three - BHPBilliton, Rio Tinto, Anglo American - and smaller companies which exploit a single commodity.)


Brian and the Beanstalk

It's all seemed uncannily like the Xstrata play in 2002: an obscure outfit with its golden share (or poison pill?) controlled by a private trader, bursts onto the London scene and leaps into a pole position among global miners, in a dizzyingly short space of time.

Except that Xstrata/Glencore didn't enjoy the backing of one of mining's highest-profile and most aggressive resource grabbers. This is the multi-millionaire Brian Gilbertson, architect of the biggest-ever mining merger, between Billiton and BHP in June 2001. As Vedanta's non-executive chair he receives a "modest" salary of 350,000 a year and got Vedanta shares worth around 7 million at today's prices. Mind you, he's since had to sell half these to meet his UK tax and national insurance obligations. But this will hardly bother the man who, over the past year, became the highest paid mining executive anywhere. When Brian got bounced from BHPBilliton his payoffs were valued at twenty five million pounds.

That Agarwal needs Gilbertson, and vice versa, is self-evident. The Indian magnate gets exposure on the most generous mining equity market in the world; the South African gets to stomp around the planet, gloating over the breadth of his portfolio. Both men have abrasive, over-weaning egos. Like Tweedledum and Tweedledee they will either buttress each other or eventually fall out. Foreseeing this possibility, Gilbertson has locked Agarwal into a contract which precludes his dismissal from Vedanta, at least until next July's London Annual General Meeting.

You might have assumed that the ex-CEO of BHPBilliton has been languishing in the wilderness since his unceremonious departure from the world's biggest mining company in 2002. In fact he was quickly adopted as a consultant by Lonmin, the London platinum company whose critical stake in Ashanti Goldfields gained it a comfortable pay-off from Anglo American as the latter looked like taking over Ghana's biggest private enterprise last year. During this period, Gilbertson was also building on his credibility among stockbrokers in his natal South Africa.

Indeed (and surely not by sheer coincidence), just a few days after Gilbertson's pivotal role in Vedanta was confirmed, Lonmin announced he was also to take charge of a new South African mining conglomerate dubbed Incwala. This will bring together Gilbertson's Lonmin clients with Impala Platinum and is intended to launch soon on the Johannesburg Stock Exchange.

Incwala is a "Black Empowerment Company" pledged to give jobs and half its capital to Historically Disadvantaged Black South Africans (HDSA): those designated by the South African government as suffering grievously under apartheid. The new enterprise promises to represent not only the needs of black men but also women.

The prospect of this bluff, white, gold-digger piloting a major resource company devoted to poverty alleviation among blacks surely deserves the award of "corporate mining anomaly of the year". Gencor, formerly headed by Gilbertson, was arguably the most aggressive anti-black company in the whole of apartheid South Africa.

In 1985, Gilbertson's company was responsible for the worst mining accident in the country's history, when 177 workers died after Gencor lowered its safety standards at the Kinross mine. And, as the South African National Union of Mineworkers sought to assert basic human rights, many of the deaths and injuries suffered by trade unionists from police brutality occurred at Gencor's operations.

During the same period, the biggest attrition rates in asbestos poisoning were registered at Gencor's two subsidiaries, Gefco and Msaulit Asbes Bpk. It's only in the past year that victims and their families have secured anything approaching realistic compensation for the deaths and illnesses they suffered.


Meanwhile, Gilbertson was not too wrapped up in his South African intrigues to fail to be attracted to Anil Agarwal and India's mineral potential. The two men may not exactly be "birds of the same feather", but they're certainly cyclists on the same route. It was Agarwal who first approached Gilbertson and they apparently really got to know each while peddling (cycles) between Oxford and London.

Gilbertson has enormous kudos and credibility which, for Agarwal, is in short supply. Other mining executives (not least at BHPBilliton) may now be chafing at the bit to get into China. But the Indian subcontinent and its upwardly thrusting middle classes still have a lot to offer, a great deal to purchase - and they speak good English too. What a diversified portfolio Sterlite seems to possess: let's hear it from Gilbertson's own mouth.

"[T]o be quite honest, I had never thought of India as a resource country at all" he naively told Mineweb last month in a broadcast interview. "I went along and found to my surprise that there is actually a great deal happening the country is very rich in resources. For example, it's the sixth-largest reserve in the world of bauxite. And then it also has the fourth - or fifth - largest reserves of iron ore in the world and those two commodities are kind of like the holy grail of mining at this time, because the markets have been so strong for the past two or three years".

Gilbertson could hardly rate Sterlite/Vedanta's opportunities any higher, or the pretended pliability of Indian citizens, despite their government's "bureaucracy". Says he: "[I]t's always easier for people in the country to develop deposits, undertake the challenges. India, I guess, is reputedly a very bureaucratic country and some countries (sic) have battled for a long time to get deposits developed and have been unsuccessful."
But what excites the burly South African is the prospect of exploiting a "very highly educated" workforce which ". is paid a fraction of what Westerners would be paid, and I'm very happy to work with those wages."

Read that statement again: it comes from the most grotesquely over-imbursed mining executive on the planet.


Anil in Wonderland

So just what is Vedanta? As a holding company it's been widely regarded as the trojan horse which Anil Agarwal is using to re-capitalise Sterlite Industries and its various businesses. It could also be seen as a sort of reverse buy-out, since Vedanta will own the majority of Sterlite, even as Agarwal seeks to expand his own dominions. And what impressive enclaves these are! They encompass copper, bauxite/aluminium, zinc, lead, and gold exploits, not only across India but also in Australia, Armenia (where it operates two mines), Mexico and Russia. (Until 2000 its subsidiary Sterlite Gold Ltd, registered on the Toronto Stock Exchange, also held mineral rights in Burma).

Let the statistics tell their own tale: in 2002 Sterlite/Vedanta apparently controlled just under half (42%) of the Indian market in copper; nearly a quarter (21%) of the country's aluminium output, and a whopping 62% of its trade in zinc. Gilbertson has described Vedanta's London listing as "a ground-floor entry into the Indian economic boom". More accurately it's a subversive basement plunder of some of the country's most valuable mineral resources.

Last year Sterlite also won the bid to "develop" the Konkola Deeps, part of Zambia's Konkola Copper Mines (KCM) which Anglo American relinquished when it couldn't raise the capital to modernise the operations. In the light of Sterlite's appalling history of bidding for projects or companies, then beating down the price, or reneging on its obligations, a Vedanta acquisition of KCM is a bad augury for any community and worker-based revival of Zambia's copper sector. Characteristically, Agarwal has provided no detail of how much he intends to inject into buying 51% of the Deeps. Anglo American had already done a secret deal with the Zambian government to forgo payment of proper compensation to workers and clean up the toxic site. In a recent interview with Mineweb, Agarwal appeared to be backing out of the deal at least for the near future. But who really knows?

Across the board, Agarwal and Glbertson plan to spend over $2bn "to expand current operations and drive down unit costs, and to develop a portfolio of attractive greenfield projects". But the biggest chunk of cash is reserved for Sterlite's aluminium operations in India; more than tripling capacity at Balco's smelters; boosting output from its Madras Aluminium subsidiary and building a one million tonnes a year refinery in Orissa at Lanjigarh.

Remember the name Lanjigarh: as we'll see it encapsulates one of the worst impending corporate assaults on Indigenous land and constitutional tribal rights in India - indeed anywhere in Asia.


Sterlite Express

Sterlite started life as a minor business, delivering copper cables for telecommunications companies in India. From 1988, as IT became the subcontinent's millennial mantra, so Sterlite's supreme opportunist was close behind. But Anil Agarwal was also determined to own and control the raw materials on which the boom depended, processing them for striking profit by using the cheapened labour and quiescent permitting for which his home country is (rightly or wrongly) renowned. He set a course from which he has never deviated except that, as his greed grew, so did the ambit of his ambitions and the scandals of his stock play.
By the time the Vedanta listing had been devised, Sterlite was already an estimable global player. This would not have been possible without the acquiescence to privatisation and foreign control promoted by the Indian government after 1993. And, as India is dragged deeper into the WTO whirlpool, failing to protect its homegrown products against even cheaper imports, so Agarwal has fixed his sights on export markets to an extent unprecedented in the country's history. This is not to say that Sterlite fails to "serve" its host country in some respects. Like any putative mining mogul Agarwal can point to a modest employment roster in India, while retaining some value to the land of his birth.

However this all seems like mere icing on a distinctly alien sponge, when compared with the reliance Agarwal places on exports, the manipulations - verging on chicanery - of his market manipulations within India, and the degree to which he has risked the lives of workers and filched the resources of India's indigenous peoples.

Shri Agarwal is perhaps the best example of a homegrown capitalist betraying the ideals on which his country's independence was predicated. At the same time (and, for some critics an even worse sin) he's fishing for the pearls while throwing his net far away from home, comfortably insulated against further domestic scrutiny.

If this sounds like idle rhetoric reflect on this: in the first quarter of 2003, Sterlite's sales rose 14%. Its export turnover grew threefold (by 201%) while its domestic turnover fell by nearly a quarter. The company's tax provision tumbled by 84%, to a large extent because the increase in exports enabled the company to benefit from tax breaks on export profits.

The domestic scrutinies started more than a decade ago when Sterlite tried locating a copper smelter in the state of Maharashtra. Many local people vigorously opposed the project and they won the day. In October 1994, and with Tamil Nadu state backing, Sterlite brought the smelter on-stream at Tuticorin, on India's southernmost tip.

Environmentalists accused the company of issuing the Tuticorin Environmental Impact Assessment (EIA) even before all the data was in - then changing its parameters after the event. Greenpeace's Dave Santillo in 1995 declared the EIA "one of the most shoddy pieces of work I have ever seen": it omitted critical references to suspended particulates and heavy metals in the smelter discharges. Coastal protection regulations were ignored, even as the plant emitted large quantities of arsenic, sulphur dioxide, lead, cadmium, antimony and bismuth.

The unions were also hopping mad, claiming that Sterlite repeatedly violated basic safety standards at the Tuticorin plant and exploited ill-trained contract workers. Warnings of a likely disaster were ignored until, in mid 1997, the top of the rotary kiln exploded causing molten metal to shower down upon the workforce, maiming two men and reducing two others to charred bone. Finally, in 1999, following a short enforced closure, the plant was allowed to re-open, though Sterlite was instructed it must submit a new environmental management plan, particularly because the smelter lay only 25 kms from the ecologically fragile Gulf of Manna. In mid-2001 the plant secured an ISO 14001 classification.

Meanwhile, in 1998, the Securities Bureau of India (Sebi) condemned Sterlite, and two other private Indian companies, for insider trading - a decision "Frontline" columnist, Praful Bidwai, called "the greatest indictment by any statutory body yet of corporate malfeasance in the stock market". Sterlite was banned from accessing the market for two years; thirty four brokers on Bombay's Stock Exchange (BSE) were also found guilty of collusion in the scam.

Agarwal had collaborated in the share price rigging with a "promoter" called Harshad Mehta. Six years earlier, in April 1992, Mehta had been found guilty of helping himself to a cool five billion rupees from the State Bank of India, by making a receipt "vanish". This hadn't prevented him from later launching a web site to dispense stock tips and analyse market trends. Nor did it deter various newspapers from publishing his gobbets of wisdom. Mehta also offered his dubious services to companies of precarious financial standing. Among these was Sterlite.

Investigations by Sebi showed that, between April and June 1998, Sterlite's scrip price moved up 41 per cent, just before the company made a bid for the Indal Alumininum company although the actual conversion price was one the company couldn't afford.

Despite limited access to funds, Mehta had set up a large network of front companies. Known collectively as the Damayanti Group, this soon acquired a hefty chunk of Sterlite's floating stock, 30,000 shares of which were provided by Sterlite as a loan, through its associate Madras Aluminium. Faced with problems in repayment, Damayanti began "rolling over" its positions from one bourse (stock exchange) to another, transferring positions among brokers though a system of credit notes.

Since there was little money to call upon, Harshad Mehta inevitably went broke. When Sebi tried to identify the front companies and link them back to him, so his cronies fudged their answers and tried covering their tracks. Finally, by tracing telephone bills, payments to lawyers and traffic with various brokers. Sebi managed to lift the corporate veil. The bureau discovered that the companies had lent Harshad funds in order to build up his concentrated position, leading to an artificial market boom and eventual implosion of the investments. In some respects, this was an earlier, Indian, version of the "Enron scam".
The key to Mehta's market manipulations were his dealings with three Indian companies, BPL, Videocon and Sterlite. They were barred from accessing the capital market for four, three and two years respectively.


Agarwalla goes to the Balco

Sterlite's 2001 takeover of state-owned Balco (Bharat Aluminium Company) provoked one of the major political controversies of that year. (Sterlite's further acquisition of a 65.9 % controlling stake in Hindustan Zinc was less remarked upon at the time. Last week, however, a challenge was mounted in India's Supreme Court to the legality of the government's sale).

This wasn't the first time Agarwal had tried appropriating an Indian aluminium major. As we have just seen, he bid for Indal by soliciting shares from its investors but then couldn't pay. It took an order from the Delhi High Court, four years later, to force him to cough up. Indal is now owned by the Birlas, through Hindalco, and is the largest shareholder in the Utkal alumina joint venture, UAIL (of which more below)...
Of course India isn't the only nation of late to sell off one of its most profitable national minerals enterprises to the private sector. The Brazilian government did it with CVRD; Bolivia with Comibol; Peru did so wholesale under its now-disgraced former president Alberto Fujimori. First past the post in implementing this key tenet of neo-liberal orthodoxy was Britain's "Iron Lady", Margaret Thatcher. She reified her splenetic hatred of the leftwing National Mineworkers Union into policy by crippling and stripping the world's longest-surviving state-owned coal industry.

But, even among this sorry bunch of betrayals, the abject surrender of Balco - let alone to an outfit like Sterlite - stinks of unprecedented expediency and under-handedness. This hasty sale of 51% of India's third biggest aluminium company (brokered by Jardine Fleming of Hong Kong) was seen by some as a "pre budget manoeuvre" to balance the government's shaky books. There are allegations that India's rightwing central administration deliberately prevented Balco from modernising on its own terms and with its own funds. In any event, the company was grossly undervalued: according to some estimates, Sterlite secured assets worth up to ten times what it paid for them.

Another critical issue (though seemingly since lost in the shuffle) was raised at this time by the Kolkota (Calcutta)-based "Telegraph". The newspaper claimed there were documents showing that Balco produced special lightweight aluminium alloys used in India's Prithvi and Agni series of intermediate nuclear missiles and rocket components; Balco allegedly supplied the casings for India's nuclear tests of 1998. The company was "bound by a supply-and-production agreement with the Department of Defence Supplies to keep this technology secret".

The agreement (S. NO 1(3)/90/T(SI)/CPO(VG)-1645) also bound to secrecy, not only metallurgists who helped develop the alloys, but also "all scientists, engineers, other officers and technical hands who came to know about the technology, its use or manufacture." An obvious fear was that by, selling the company to Sterlite, details of the technology might be leaked to outsiders.

The most immediate putative victims of the Balco "fire sale" were members of its workforce, threatened by redundancies and loss of benefits. Seven thousand workers in the newly-formed "indigenous" state of Chhattisgarh came out on a lengthy strike and Mr A M Ansari, the working president of the Bharat Aluminium Employees Union (a member of CITU), was summarily dismissed by Sterlite's management on the pretext of his bad behaviour some three years before.

Over the longer term those who stand to suffer worst are the Adivasi (tribal) communities of Orissa, whose rights to prohibit mining on their scheduled territory under the historic 1997 Samatha ruling, have been flagrantly violated. Indeed, Agarwal told the "Times of India" in early 2001 that he had "no idea [about the Samatha judgment]".

For many decades, India's bauxite has attracted attention from the large, integrated, aluminium producers. The country hosts the fifth (or sixth) largest global reserves, nearly two thirds of which are in Orissa and neighbouring Andhra Pradesh. When the central government tried to auction off the National Aluminium Company (NALCO) during 2002 and early 2003, almost every major manufacturer of the miracle metal put in a bid, or considered doing so.

Fortunately union-led opposition to yet another surrender of national patrimony, backed by various politicians and civil society organisations, has scuppered the scheme - at least for the time being. As a result, BHPBilliton's enthusiasm for sourcing alumina from India appears to have dimmed, while Rio Tinto seems somewhat jaundiced by Orissa anyway.

However, Pechiney of France already has a long involvement in India and is sure to remain; its newfound global partner, Alcan, has been there since 1944. Russian, and especially Chinese, appetites for alumina are growing at an alarming rate. China's demand is expected to double this year alone, with the increase dependent on imports. The international scramble for India's bauxite may have only just begun.
It's not surprising then that, after grabbing Balco, Sterlite didn't wait long before securing the bauxite resources around Lanjigarh in south-western Orissa. These are located just to the north of the Baphlimali concession held by Utkal Alumina International Ltd (UAIL).

The latter's exploits have already sparked an outcry around the world, not least when police murdered three community protestors at an unarmed community demonstration in Maikanch, during December 2000. Yet, so far, Balco/Sterlite's own exploits in the region have gone virtually unnoticed by the outside world. Until last year such apathy could be explained by the fact that UAIL was dominated by two high-profile global companies - Alcan of Canada and (until its belated withdrawal) Norway's premier corporate enterprise, Norsk Hydro. Now that Vedanta is based in London ignorance is no longer an excuse.

In fact Sterlite/Vedanta has gone much further than UAIL, arguably with an even more cavalier disregard for local people . Thanks to the billion or more pounds of new investment on which it can now call, Sterlite now has the wherewithal to boost Balco's throughput to a level matching (or even surpassing) its rivals.
The proposed million tonnes a year alumina plant at Lanjigarh will refine bauxite from the Nyamgiri hills (5km south of the village) which contains reserves of over 70 million tonnes. The local government in mid-2002 estimated that twelve villages would be negatively impacted by the project, sixty families would need to be "relocated" and five times as many would be adversely affected by land acquisition. According to Sterlite, 1073.4 hectares (2683.5 acres) of land is required, but the company seems to have neglected to produce an exact figure of those likely to be uprooted.

It is notoriously difficult in India (and indeed many other countries) to make accurate assessments of those who'll be "affected" by an extractive project, and to what extent. Often surveys will not include many who are dependent on the land but lack clear title to it. The project's proponents will ignore or underestimate the nature of impacts: for example, the degree to which women, especially mothers, will become further deprived; whether even more families will be shifted as the project advances; the degree to which exhaustion or pollution of water supplies and curtailment of market access increase endemic poverty. One can nonetheless be sure that figures currently cited in the Balco case are highly conservative.


Nut crackers

You'll be forgiven if you're not aware of the resistance to Balco in Orissa which predates the Sterlite takeover. Villagers successfully spiked the company's plans to trespass on another bauxite deposit, in the Sasuobohumali area of Kashipur. As an example of Gandhian satyagraha it deserves more than just a footnote to any decent history of non-violent community self-determination.

Last April the opposition to Balco in Lanjigarh was stepped up. A local leader, Lingaraj Azad now found himself under attack. The following (abridged) report, by an Indian civil liberties organisation, describes what happened.

On 2nd April 2003, Lingaraj was arrested in Lanjigarh apparently for speaking out against the Sterlite plans. Nearly 250 unarmed people, including 150 women and children, set out for Lanjigarh Police Station to ask why. But, before reaching it, they were attacked by around a hundred people with lathis (staves), cricket bats and stumps. The villagers are sure their attackers belonged to a "youth club" (Yubak Sangha) that's funded by Balco. On trying to flee the protestors were chased to Basantpada village where their assailants started attacking houses, destroying cooking utensils and food grains, breaking doors and damaging roofs. Shortly afterwards, two representatives of the affected villagers asked the Peoples Union for Civil Liberties (PUCL) to send in a fact- finding team - which it did.

The team visited several villages in the project area and recorded injuries visible on peoples' bodies. The inhabitants admitted that they hadn't lodged any complaint with the police since they were scared they would be beaten again; in any case they considered the police to be "hand in glove" with their attackers.
The majority of the population in the villages visited by PUCL belongs to the Kutia Kandh tribe, which depends on agriculture and the collection of forest produce. Farming is totally rain-fed and, during years of drought (as in 2003), villagers have to leave their homes in search of work, or else depend on forest gathering. (By contrast, lack of water seems of much less little concern to Vedanta/Sterlite. The company intends to construct a weir across the river Bansadhara at Bilatipadar, thus assuring a year-round supply to its alumina refinery).

Local people had first become aware of Balco's specific plans when the Kalahandi district collector served notice for acquisition of land in June 6 2002 and "invited" them to register their opinions (or complaints) about the project. Despite a woeful lack of notice (by comparison those affected by World Bank/IFC project are given an initial 90 days breathing space), nearly one thousand people reportedly assembled at the Revenue Office on June 22nd and submitted a memorandum opposing the project, for forwarding to Orissa's Chief Minister, Navin Patnaik. Close on two hundred individual protest petitions were also filed. Four days later, another gathering in Batelima was dominated by villagers calling for complete cancellation of the project.

From mid 2002 Indian government officials reportedly paid many visits to dissident villages in a largely fruitless attempt to persuade inhabitants to quit their land on promise of compensation. Towards the end of March 2003 seven residents of Turigada, arrested by police, were freed when women gheraoed (blockaded) the vehicle carrying them. Soon afterwards villagers at Basantpada were said to have snatched instruments used by a company-commissioned survey team and issued threats against its members. On April 1st, Lingaraj Azad went to Lanjigarh in an attempt to persuade pro-company residents that they should also fight the project. Instead, the villagers took him to the police station where - based on the surveyors' complaints - he was arrested, sent to court and bailed the following day.

Disturbingly Lingaraj later told the PUCL that, while in police lock-up, he overheard the officer in charge telephoning instructions to pro-Sterlite "youth club" members in Lanjigarh to "beat up men and women with cricket bats and stumps". And, indeed, this is what occurred the following day.

PUCL concluded that the police and the administration were, at best, dismissive of local peoples' fears and, at worst, complicit in attacks made upon them. "It is hard to believe that [the area] is a part of the same India that the elite continuously brags about having catapulted into twenty-first century. [It is] a tribal-dominated area, but very few welfare-schemes meant for their development, seem to have reached them. The level of awareness, particularly about their fundamental rights, is distressingly low. The condition of these people is a great reflection on the 'developmental' priorities of our governmentThe government has to share responsibility for these people's deplorable living condition. But instead, it appearshell-bent upon handing over these mineral-rich areas to the private companies like Sterlite, at the cost of total destitution of these hapless people".

"The people are terrorized, and believe (perhaps rightly) that their attackers enjoy the support of the police. This apprehension of the people is reinforced by the fact that the attackers admit in public that they have attacked the agitating villagers...Now they are scared even to enter Lanjigarh village".
The investigators conceded that "[t]here is a division within the local people about the Sterlite Project. [It] seems to have caught the imagination of some people, particularly non-tribal youths and the local elites, that it would be the harbinger for development, growth and employment in this backward region. (Kalahandi district has almost become a metaphor for backwardness and starvation deaths)[U]nless attended to in a proper way, this division might take an ethnic character in the future i.e. tribals vs. non-tribals as in some other areas of the state."

As PUCL concluded: "The government, instead of displacing people....in the name of development, should take measures to augment the local resource base - like constructing irrigation projects in the area to supplement peoples' livelihood."

Over the succeeding months, PUCL's fears were partially borne out. In June, 2003 thirty protestors, belonging to an organisation called Nyamgiri Surakshya Samiti (by then active for a year) damaged the project's foundation stone soon after it was laid by Patnaik. Three hundred Adivasis, wanting to submit a memorandum to the Chief Minister, condemning the planned destruction of the Nyamgiri hills, were prevented from doing so by the police.

Shortly afterwards, Anil Agarwal - accompanied by representatives of BHPBilliton and the JP Morgan bank - urged Patnaik to "speed up" Orissa's mineral development. A representative of the Lokshakti Abhiyan movement, Prafula Samantra, confirmed that the project was a direct violation of the Samatha Judgment, prohibiting the alienation of tribal lands.

Two years earlier Agarwal had confessed ignorance of the Samata ruling. Now both he and Gilbertson have no excuse.


"We three kings of the Orient are - following the Twin Star?"

By now you may agree there's more than enough evidence to assert that, by accepting Vedanta/Sterlite so uncritically into its bosom, the London Stock Exchange has betrayed any pretence of promoting "transparency" or "corporate social responsibility".

But the LSE may also have failed to carry out its less irksome routine duty of a thorough "due diligence" study into the company's chain of ownership. This is not, of course, the same as a "chain of command" - at the top of which Agarwal and Gilberston are quite clearly perched...

It was in September 2003 that Agarwal publicly announced he intended to resurrect Sterlite as Vedanta on the LSE. The regulatory authorities delayed the launch for two months, ostensibly to investigate the new company's murky financial attributes. Unravelling the cat's cradle was - as one city broker described it last November - "a bit of a nightmare". Indeed, if the British regulators now know exactly what holding Agarwal and other Indian opportunists, have in Sterlite Industries, they're more astute than Indians who've been trying to untie the knots for quite a while. As Lex, the Financial Times' columnist, enigmatically commented in early December "[Sterlite[ has a complicated structure and a chequered corporate governance history"
At the root of this "complicated structure" is an outfit called Twin Star Holdings, located in the tax haven of Mauritius. Up until last year, this was widely assumed to be Agarwal's own holding company with a majority ownership of Sterlite Industries. In 1998 Twin Star made its first major move towards an offshore company when it agreed a major equity investment in Canada's First Dynasty Mines, founded by that illustrious mining renegade, Robert "Toxic Bob" Friedland.

Through Twin Star, Sterlite agreed to invest US$7.5 million in First Dynasty, entitling the Indian company to appoint three of its own directors and eventually ending up with about 43% of the Canadian-based company. Agarwal's main objective was to ease Sterlite into First Dynasty's Zod gold project in Armenia (fortuitously named as the "country of the year" at the 2003 World Congress on Mines and Money held in London). In February 1999, Agarwal and two of his colleagues did indeed join First Dynasty's board whose top dog was Marcus Randolph, hot foot from a stint as one of Rio Tinto's senior managers. Soon after, Twin Star's investment in First Dynasty was completed.

Little was then heard about Twin Star until 2003 when the company confirmed it held 55% of Sterlite stock, with another 7.13 per cent owned by Sterlite's Madras Aluminium Company which, it claimed, was owned 80% by Twin Star. Perhaps little remarkable there. However, in October - just as the Vedanta elephant was being paraded for its first public inspection - Twin Star announced it wanted to raise its stake in Sterlite to 75%. The Indian authorities feared that Balco and Hindustan Zinc might now pass to a new owner: such a transfer had been specifically proscribed when Sterlite took over the companies. (A separate, but related, fear was that, by going overseas to accrue new investment for Sterlite, Agarwal might reduce the Indian government's remaining interest in Balco and Hindustan Zinc to less than 26 per cent. This is the minimum equity required for India to block any board resolution).

As the Indian authorities tried coping with these dilemmas, the Finance ministry's foreign investment unit revealed that the real owner of Twin Star wasn't Agarwal after all but a Mr Vinod Shah. Yet another Non-resident Indian based in London, Shah had acquired a 100% stake in Twin Star through his holding company Volcan Investments Ltd. It wasn't clear then whether the provisions of Sebi's "Substantial Acquisition of Shares and Takeovers (SAST)" regulations had been violated and, to our knowledge, it still isn't clear.

That Anil Agarwal may not control most of Vedanta's share capital is clearly an important point at issue. But, much more worrying, is the prospect that - come rain or come shine (Agarwal or Shah) - what's left of Indian control of two major, formerly publicly-owned companies, may diminish into impotence. This must be of overwhelming concern, especially to the workers, Indigenous peoples and politicians who vociferously opposed these unwarranted sell-offs in the first place.

Alas many others - whether inside India or out of it - won't lose an ounce of sleep over these matters. In a mere ten years, between 1990 and 2000, Sterlite's turnover increased a monstrous 83-fold (sic) while its net value rose 4,000%.

For the bountiful brokers, acquisitory analysts, and indiscriminate investors of London who toasted Agarwal and Gilbertson a month ago, this seems to be the only bottom line that counts.

Markets

The Times September 26, 2006

Stock markets

Zambian fears combine with metals sell-off to hit Vedanta
By Nick Hasell
Larger capitalisation shares
A SELL-OFF in metals markets coupled with jitters ahead of Thursdays elections in copper-rich Zambia left Vedanta Resources with the worst position in a retreating FTSE 100.

With oil prices falling beneath $60 a barrel, a six-month low, gold which is commonly used as a hedge against inflation also came under pressure. So too did non-precious metals, such as copper. Weak US housing data fuelled concerns over slowing economic growth in the US a key factor in the switching by funds out of commodities and metals over the past few months.

Those conditions meant yesterdays FTSE 100 losers were dominated by the natural resources sector, either in the form of oil majors such as BP, off 10p at 563p or miners, with BHP Billiton down 34p at 853p and Xstrata 77p cheaper at 20.36.

But it was Indias Vedanta that came off worst, with this weeks presidential poll in Lusaka giving short-term investors an additional reason to shun its shares. Incumbent Levy Mwanawasa, who is seeking a second and final term, faces a challenger in the Patriotic Fronts Michael Sata, who earlier this month was predicted by opinion polls to win 52 per cent of the vote, against Mwanawasas 27 per cent. Although yesterdays final Zambian opinion poll put Mwanawasa unexpectedly back in the lead, natural resources investors have been unsettled by Mr Satas threats to raise taxes on foreign-owned mines, and limit the stakes foreign companies can hold in mining projects.

Vedanta owns 51 per cent of Konkola, Zambias largest copper producer, where it has recently invested $400 million (210 million). Vedanta faded 81p to 11.12, with the FTSE 100 down 24.0 at 5,798.3.

Mines & Communities Website

Agarwal accused of violating Armenian laws - while Vedanta continues its rampages through India - by Nityanand Jayaraman, Special to Corpwatch USA


Anil Agarwal, executive chairman of Vedanga Resources plc, was last week cited for yet another string of major violations - this time for his operations (through Sterlite Gold) in Armenia.

It could hardly be worse: the Armenian government's Ministry of Nature Protection is charging him with " violations of land allocation; uncertified laboratory work; improper control of drill samples; and underground mining termed "illegal"." The ministry also alleges that Sterlite has under-estimated gold reserves at Zod "by more than 2 times".

The news came in a story published on November 17 by Mineweb, the mining industry's leading electronic news service, based in South Africa.

In London Vedanta's PR outfit says it is their "understanding" that the operations are separately owned by Agarwal and not Vedanta. In fact the Zod gold mine was included in the inventory of assets offered to investors when Vedanta made its London float in late 2003. Four years earlier, First Dynasty - a company then controlled by the notorious Robert Friedland - had sold a major stake in Zod to Twin Star, the holding company owned by Agarwal, which also has 54% of Vedanta Resources plc. Agarwal was made chairman of the Zod gold mining company in 1999.

One of the options open to Agarwal, in order to extricate himself personally from Armenia is to arrange a fire sale of the failed gold mine and its companion operation, using Vedanta itself to make a bid.


Vedanta Undermines Indian Communities

A tribal temple on Shervaroyan Peak in the hills of Yercaud in Southern India recently developed several large cracks. Built several centuries ago, the temple has withstood colonization and independence. But of late, a new mine threatens to destroy this historic site. Vedanta, a fast-growing British company, owns a subsidiary Madras Aluminium Company Limited (MALCO) that has been strip mining this and nearby peaks for bauxite, the ore that yields aluminium used in products from throwaway soda cans to aircraft bodies.

From where he stands, K. Babu can see the deep red gashes ripped into the hillside barely 100 meters from the temple. He and other community activists charge that MALCO is a heavy weight player in the local economy and politics, and a significant contributor to environmental degradation. Theres a limit to exploitation. Nothing is sacred any more, says the president of the local youth federation. Their only botheration is to excavate more and more. Maintaining ecology is not at all an issue.

MALCOs operations in the southern Indian state of Tamilnadu span more than 60 kilometers from the mist-clad Yercaud and Kolli hills to the impressive earthen dam and reservoir on the averi River in Mettur.

On the banks of the huge reservoir, MALCO operates a smelter and a refinery complex where locally mined bauxite is converted into aluminium. A mountain of toxic red mud a by-product of aluminum production is separated from the reservoir by a flimsy embankment.

MALCO is a small cog in the giant wheel that is Vedanta Resources, a company set up by British billionaire businessman Anil Agarwal. Born in eastern India, he started out as a scrap metal merchant in Mumbai, before moving to London 30 years ago. Agarwals fortunes soared as the small Indian company he set up in 1988 rode the telecom boom, supplying copper cables to telecom companies in India.


Vedanta in India

Today, Vedanta is a vertically-integrated behemoth with an impressive international portfolio comprising copper, bauxite (aluminium), zinc, lead and gold. It has raised almost $1 billion on the London Stock Exchange and has started to snap up mines in Zambia and Australia.

In India, which remains its production base, the company runs a giant copper smelter in the coastal town of Tuticorin in the southern state of Tamil Nadu, and aluminium smelters in the central and east Indian states of Chattisgarh and Orissa. According to the companys annual report, it plans to start a massive captive mine in the Niyamagiri hills of Orissa, a smelter in nearby Lanjigarh, and a refinery also in Orissa.

According to activists, the projects threaten densely forested areas that are home to tiger, Indian bison, bear, and elephant. The effected human population includes impoverished tribal communities, some of whom charge that Vedantas projects are illegal, and that the state and central governments are colluding with the company to circumvent environmental protections.

Nobody wants to take on Sterlite. They have built entire plants within their copper complex [in Tuticorin] with no permission from any of the authorities and without fear of reprisal," says Fatima Babu, a womens activist and fisher leader from Tuticorin. "The government machinery has not just tolerated Sterlites violations but facilitated it.

Faced with community opposition, Sterlite has set up a foundation to address local needs and sited seven of its 18 centers in Tuticorin, Sterlite Coppers hometown.

"We don't do anything extraordinary," S. Chaamundi, country head of the foundations child welfare program told Indias Financial Express. "But the glow in the eyes of the children when they feel that they have someone to bother about them, the shine in the face of the poor parents when they report their child also say 'sorry' and 'thank you,' like the children in the homes they work as housemaids or coolies, make us feel we are doing something worthwhile."


Telling Tales from Tuticorin

These social welfare programs have done little to blunt a long history of opposition to Vedanta or to counter evidence that it has polluted the environment, poisoned locals, and colluded with officials to bypass environmental protections.

In less than 8 years, 139 people have been injured and 13 killed by accidents or pollution from the Tuticorin smelter complex, according to documented reports and testimony from workers. [See box on Occupational Injuries and Deaths at Sterlite]

Complaints about the company began mounting in the mid-1990s, when protesters in Ratnagiri in the western state of Maharashtra cited environmental concerns to block Sterlite from building a smelter and to force the state to revoke the companys license. Shortly after, a Tamil Nadu government invitation to Sterlite to build a plant in Tuticorin sparked massive protests by residents
-- particularly fisherfolk.

But the Tamil Nadu project had the blessing of Chief Minister J. Jayalalithaa Jayaram, who laid the foundation stone for the complex. Less than four months after applying to build the smelter, Tamilnadu Pollution Control Board (TNPCB) granted conditional licenses to construct a 140,000 ton-a-year copper smelter and associated plants.

That license stipulated that the unit be at least 25 kilometers from the Gulf of Mannar Marine National Park in order to protect the regions ecology its famed coral islands and exotic species such as dugongs, sea turtles, and pearl oysters -- from sulphur dioxide, arsenic and lead emissions.

In 1995, ignoring the TNPCBs instructions, Sterlite erected the smelter complex including a mothballed smelter scavenged from the U.S. 16 kilometers from one of the protected islands. Rather than act on the violation, the pollution board granted the company an operating license to manufacture up to 40,000 tons of blister copper.

In 1996, local resistance came to a head when fisher folk used an armada of small boats to prevent ships carrying Sterlites raw material copper concentrate from entering the Tuticorin harbour. But resistance waned after the government conceded to one of the protesters demands: to prohibit disposing the effluents at sea.

Within two years a spate of accidents and gas leaks from the factory spurred the Madras High Court to commission a report on pollution by Sterlite. NEERI a national environmental engineering laboratory faulted the company for discharging dangerous levels of pollution into the environment and recommended the companys closure. Barely three months later, the same court reversed itself, cleared Sterlite, and recommended its reopening.




Occupational Injuries and Deaths at Sterlite.

Sterlite denies that many of these incidents were caused by the company. Speaking about the July 1997 incident where women workers at a neighboring cut-flowers factory, charged that they had been exposed to toxic gas from the plant, Agarwal told the media that "The incident has nothing do with our factory and there was no leakage of any kind of gas from our plant."


Date Description of Injury/Fatality

1997 Killed: Explosion at the plant. 2 persons reduced to charred bone; 2 workers maimed. July
1997 Injured: Toxic gas leak from Sterlite. 120 people exposed. 45 (42 women and 3 men)
hospitalised.

August 1997 Exposed: Workers at nearby Tamilnadu Electricity Board substation suffer headache, coughing and choking due to smoke emanating from Sterlite.

August 1997 Killed: Two contract workers killed, one injured.

April 1998 Killed: Two employees killed, four injured.

March 1999 Injured: Sterlite Gas Leak 9 employees of All India Radio hospitalised

September 2000 Injured: Two workers sustain acid burn injuries.

November 2000 Sterlite pumps toxic effluents into village pond. Villagers detain factory employees.

July 2001 Killed: Worker trapped under Gypsum load.

August 2003 Killed: Lorry cleaner killed during loading

August 2003 Killed: Lorry cleaner killed while loading Rock Phosphate

December 2003 Killed: Welder succumbs to a fall

2003 Killed: Electrician killed. Another worker injured.

May 2004 Killed: Worker dies after fall from lorry

September 2004 Killed: Contract worker run over by crane

Source: Sterlite workers and ex-workers, 2005.
Cited in Business India, March 13, 2005

Then, weeks after the facility re-opened, nine employees of a neighboring radio station who were hospitalised, blamed a gas leak at the factory.

By September 2004, when a Monitoring Committee (SCMC) empowered by the Supreme Court visited Sterlite, the plant was churning out four times the allowed levels of pollutants, according to the Vedantas Annual Report 2004.

In the face of this record, some environmental and human rights activists are confident that local resistance will gain strength. The [anti-Sterlite] campaign is bound to pick up because of [Agarwals] arrogant expansionism, says T.S.S. Mani of Human Rights Tamilnadu Initiative, a Chennai-based voluntary organisation.


Other activists remain sceptical.

I dont know how we are going to succeed given the level of [government] collusion, Fatima Babu says. Even now, they are going ahead with illegal expansions and business as usual.

That cynicism is fueled by the fact that all the new construction in Tuticorin has occurred without the environmental clearances legally required by both the central and state governments, and that other illegal construction at the Orissa site continues.

At the time of the Supreme Court monitoring committees 2004 visit to Tuticorin, Sterlite had nearly completed construction of a 300,000 ton-per-year copper smelter, a 127,000 ton copper refinery, a power plant, and several other units. None had government approval.

Nonetheless, barely a day after the committees visit, the central government gave post-facto clearance to the already constructed plants despite the fact that Sterlite had never gotten the pollution boards consent to built them. The board approval came in April 2005 when the factory was ready for production. According to a July 2005 Supreme Court Committee report the TNPCB
claimed that it consented after the Central Ministry ordering it to do so.

Senior TNPCB officials declined to comment. Ill get into trouble if I speak to you. Please dont ask me anything, said R. Ramachandran, member secretary (acting) of the board. A faxed letter seeking clarification on the reasons for TNPCBs failure to force compliance, elicited a cryptic response from Surjeet K. Choudhary, secretary to the Tamilnadu government and temporary board chairman. Board is taking necessary action, he wrote.

Phone calls and emails to Secretary to the Union Environment Ministry Prodipto Ghosh and to public relations chief Maria Doss went unanswered.


Deforestation and Evictions

The controversies have apparently not affected the companys bottom line. The man behind Vedanta/Sterlite, Anil Agarwal, reported that attributable profits for year ending in March 2005 were up 66 percent to $120 million". This has been an exceptional period for metal prices driven by strong demand from China," as well as for "increased foreign investment and the potential [for India] to become a major regional manufacturing hub," he said in Vedantas annual report. Agarwal acknowledged that the company had benefited from the political climate. The Congress Party, elected in May 2004, "has maintained a policy of growth and liberalization" favorable to his company, he reported.

That growth is in no small part a consequence of Agarwals ability to work the system. Indias commerce minister P. Chidambaram was on the Vedanta board until his party assumed power in New Delhi last year. His replacement, 70-year old Naresh Chandra, is a former cabinet secretary and senior advisor to the prime minister of India from 1992 to 1995, and Indian ambassador to the US from 1996 to 2001.

A cartoon in Business India depicts the Vedanta/Sterlite founder squeezing himself through an hour-glass saying In India, you must have patience. Everything will come through. Many concede that the London-based billionaires understanding of Indias decision-makers is frighteningly accurate.

Ritwick Dutta, a Supreme Court lawyer who has brought Vedantas violations in Orissa to court, says that the company adopts a time-tested strategy: They dont go for small violations. They go in for massive violations, bring it to light and then get post-facto clearance after payment of an insignificant fine. In Orissa, they chopped down trees on 58 hectares, and gladly paid the fine of Rs. 30,000 or so ($650). Now, they have gone ahead and clear-felled another 1,000 hectares of forests in Chattisgarh.

On September 21, another Supreme Court monitoring committee, this time the Central Empowered Committee (CEC) on Forests, recommended revoking Vedanta Alumina Ltds environmental clearance for a 1 million ton aluminium refinery in Lanjigarh, Orissa. The CEC found that Vedanta had falsified information, destroyed 58 hectares of forest land and begun construction without the required clearances.

The refinerys viability is dependent on mining the nearby Niyamagiri hills which are in a reserve forest. But the company failed to disclose this while seeking permission for the refinery, says Dutta. Their strategy is to quickly invest money and build the refinery and then plead with the authorities that their investment nearly Rs. 3500 crores ($780 million) would be rendered unviable if the mine is not cleared. The Lanjigarh plant is nearing completion, while the mining proposal has yet to secure approval.

Company head Agarwal brushed aside these concerns in his annual report. "There have been some public interest submissions to a Supreme Court of India sub-committee, regarding the environmental clearances for the bauxite mining and these are currently being addressed.

Some activists suspect that the ways the company is addressing the problem is not to ameliorate damage, but to work its special relationship with government officials. According to Dutta and the CEC, the situation at Orissa throws the integrity of the authorities in question.

Indeed, the CEC hints at complicity between the company, the Union Ministry of Environment and the Orissa government. In its report, the committee writes: The casual approach, the lackadaisical manner and the haste with which the entire issue of forests and environmental clearance for the alumina refinery project has been dealt with smacks of undue favour/leniency and does not inspire confidence with regard to the willingness and resolve of both the State Government and the MoEF to deal with such matters keeping in view the ultimate goal of national and public interest.

Besides the clear cutting, there is the issue of demolition of tribal villages on the land that Sterlite wanted to occupy, says Dutta. In 2004, two tribal villages were razed, and the residents were forcibly relocated to resettlement camps. Since then, two more villages have been evicted with help from the state police and company-sponsored goons, according to tribal rights activist Prafulla Samantara.

As of November 10, armed police stationed around Lanjigarh were preventing tribals and activists from congregating at the plant gate to protest the Vedanta projects illegal construction, said Samantara. Police have detained several tribal leaders and their supporters, he said, and a cordon around the village was keeping him from protest site.

The non-profit Peoples Union of Civil Liberties investigated the human rights violations reported by Lanjigarh residents and concluded: It is hard to believe that [the area] is a part of the same India that the elite continuously brags about having catapulted into twenty-first century. ...The people are terrorised, and believe (perhaps rightly) that their attackers enjoy the support of the police. This apprehension of the people is reinforced by the fact that the attackers admit in public that they have attacked the agitating villages.

Nityanand Jayaraman is a Chennai-based journalist investigating and reporting on corporations and their impact on environment and human rights.

Bloomberg - 6 October 2006

Zambia plans to raise copper-mining tax to 2,5%


Zambia's former Finance Minister Ngandu Magande said the country plans to increase the sales tax paid by copper and cobalt mining companies to 2,5 percent, Reuters reported, citing an interview with Magande.

The company currently charges them 0,6 percent, the newswire said on Thursday. Magande is expected to retain his post as finance minister after President Levy Mwanawasa, re-elected on Oct. 2, names his new cabinet, it added.

The country will also force the companies to increase the pay of qualified Zambians to match the salaries of expatriate workers, Reuters said.

Zambia plans to increase economic growth to between 7 percent and 8 percent, from current levels of 5 percent, the newswire said.

Vedanta Resources PLC
10 October 2006

Vedanta Resources plc
Production Report for the Second Quarter and
Six Months Ended 30 September 2006


Highlights


Higher aluminium, zinc and Indian copper production volumes

Full commissioning of BALCO new smelter back on track

Ongoing exploration at Hindustan Zinc increases reserves

Acquisition of Sterlite Gold Ltd completed



Performance Summary

Production volumes for aluminium, zinc and Copper - India during the six months
ended 30 September 2006 ('H1') were higher than in the corresponding six months
of the previous year due to the progressive commissioning of the new Korba II
smelter and the ramp up of the new Tuticorin and Chanderiya smelters in the
second half of the last financial year.

The de-bottlenecking project at our Tuticorin copper smelter to enhance capacity
to 400,000 tpa is progressing well and will be completed by December 2006. Our
Phase II expansion projects are progressing on schedule with orders for critical
equipment and packages placed. The alumina refinery at Lanjigarh is in the final
run up for commissioning.

Mined metal production at KCM improved as compared to the preceding two
quarters. Refined copper production was lower primarily due to a planned
shutdown of our Nkana smelter.

The inventory build up at the end of the last quarter has been largely sold down
during the current quarter.

On 30 September 2006, we completed the acquisition of 80.8% of Sterlite Gold
Ltd's shares.


Aluminium

The existing plants at BALCO and MALCO continue to operate as per plan and at
their rated capacity. The new Korba smelter produced 44,000 tonnes during this
quarter, taking its total production in H1 to 86,000 tonnes. The impact of the
tripping of the power plant in Korba in May 2006 has been overcome in a very
short span of time due to the sustained and focused work done by our team. A
total of 130 pots that were affected have now been readied and are being
commissioned progressively. As of 30 September 2006, a total of 265 pots were
commissioned and the remaining 23 pots are expected to be commissioned during
October 2006. The performance of the pot room has been improving steadily and we
expect to reach our rated capacity towards the end of this financial year.

The inventory build-up of 13,000 tonnes of metal at the end of the last quarter
has been largely sold down with higher sales during this quarter.

The 1-1.4 mtpa alumina refinery at Lanjigarh is progressing well. We are now in
the final run up for commissioning and expect to charge the bauxite by
January 2007. As previously stated, in respect of the bauxite mine permits, the
matter is still pending with the Central Ministry of Environment and Forests,
which is yet to file their response in the Indian Supreme Court.

Preparatory work for the new 500,000 tpa aluminium smelter at Jharsuguda, Orissa
is progressing well and over two-third of the orders have been awarded. The
first phase of 250,000 tpa is likely to be commissioned by the second half of
2009, as scheduled.

The World Environment Foundation, in association with the Institute of
Directors, India awarded the prestigious Golden Peacock Special Commendation
Award 2006 for Environment Management to BALCO in recognition of its world-class
environment practices. BALCO also won the Greentech Environment Excellence Gold
Award 2006 for the second consecutive year. This award is instituted by the
Greentech Foundation towards outstanding environmental performance, efforts and
commitment to environmental management.


Copper - India and Australia

The copper smelter at Tuticorin performed well with cathode production at 80,000
tonnes during the quarter and 137,000 tonnes in H1. De-bottlenecking of this
smelter to improve rated capacity to 400,000 tpa is on track and we expect this
to be completed on schedule by December 2006. Mined metal production at our
Australian mine was 7,000 tonnes, marginally lower than the corresponding
quarter in FY 2006, due to the planned closure of Thalanga Copper Mines in the
second quarter of last year.

During the quarter, Sterlite's copper operations won the prestigious 'Excellent
Energy Efficient Unit' award instituted by Confederation of Indian Industry for
the sixth time in a row. The copper operations also won the 'Greentech
Environment Excellence Award' instituted by the Greentech Foundation.


Copper - Zambia

Mined metal production during this quarter of 25,000 tonnes was a substantial
improvement over the preceding two quarters and we expect to sustain this trend
in the future. Refined copper production during the quarter was 31,000 tonnes,
lower than the corresponding quarter in the previous year primarily due to the
planned shutdown of Nkana smelter, which reduced output to20,000 tonnes during
this quarter as compared to 27,000 tonnes in the corresponding previous quarter.
We also had a brief setback in the tailings leach plant as a result of a fire
which affected the plant availability and recovery of metal, which have since
been restored.

Progress on the KDMP expansion project and the Nchanga smelter remains on track,
with orders for major packages having been placed. The smelter construction
activity and the shaft sinking work have both commenced on site and are
progressing as per schedule.


Zinc

Mined metal production at HZL in H1 at 256,000 tonnes was substantially better
than 220,000 tonnes during the previous period. Production of refined zinc at
161,000 tonnes in H1 was 31% higher compared with the corresponding prior period
output of 123,000 tonnes.

Zinc inventory of 15,000 tonnes at the end of first quarter, has largely been
sold down. During the quarter we also sold surplus zinc concentrate of 90,000
dry metric tonnes.

HZL continues to expand the exploration programme focused around its mining
operations in Rajasthan. As a result of this ongoing expansion programme, the
reserves as of 31 March 2006 have now been reassessed at 53.4 million tonnes and
certified by an independent assessor, up from 48.6 million tonnes reported
earlier.

The new 170,000 tpa Chanderiya hydro smelter is progressing as per plan and all
major orders have been placed. The project activity is progressing in full swing
and the smelter is on course for expected completion early in 2008.

During the quarter, the Institute of Directors, India awarded the Golden Peacock
Award to HZL, in recognition of HZL setting new standards in training
excellence.

Whaddya reckon Dai ?

Still looks to be the outstanding value amongst the mining majors.

Ian