Vedanta loses $10 billion investment at Niyamgiri and slips to FTSE 250

Celebrations of the Niyamgiri victory at Jarapa in August

Celebrations of the Niyamgiri victory at Jarapa in August

On Saturday 11th January the Ministry of Environment and Forests finally gave its statement formally rejecting permission for Vedanta’s Niyamgiri mine. In late December another major disaster hit the company when low share prices got them officially demoted from the FTSE 100 to the FTSE 250, removing their ‘blue chip’ status.

The failure of the Niyamgiri bauxite mining project is estimated by some to have cost Vedanta $10 billion in lost investments. Vedanta boss Anil Agarwal had built the Lanjigarh refinery at the foot of Niyamgiri mountain, and even expanded it sixfold, so sure was he that he would gain permission to mine despite the local inhabitants’ dissent. In November 2004 he even used a Financial Times article to mislead investors and create confidence, by claiming that he already had permission to mine the mountain.

The 2004 FT article which has now been removed from the web.

The 2004 FT article which has now been removed from the web.

Agarwal is now trying to keep his investors happy by claiming he will get bauxite to keep his refinery alive from another source in Odisha, but there are no immediate options available and activists are demanding the decommissioning of the Lanjigarh refinery, which has repeatedly spilled toxic red mud in local streams and polluted the surrounding villages.

The ruling against the mine is the culmination of a ten year struggle by a peoples’ movement led by the Dongria Kondh, the tribe indigenous to the mountain. It is being hailed as a precedent victory for grassroots democracy, after Supreme Court judges initiated a referendum on the mine in which every inhabitant of twelve villages on the mountain voted against the project, giving passionate speeches against the company and the Odisha government.

Meanwhile, after Vedanta’s share price fell rapidly in December, to an all time low of 775p (from a 52 week high of 1,335p), Vedanta officially lost its blue chip status on December 9th, and was relegated to the FTSE 250, making it much harder for the company to secure investments and loans for its many acquisitions and other risky projects.

 

 

 

 

 

Anil Agarwal

Anil Agarwal

In a panic Anil Agarwal (majority owner and Chairman) began to buy back as many shares as possible to increase the share price and save the company. He bought 1.7 million shares on Dec 19th, and another 3.5 million on Dec 24th, through his holding company Volcan Investments Ltd, which is based in the Bahamas, a UK controlled tax haven. A little later his new Executive, Tom Albanese (formerly Rio Tinto CEO), also bought a large chunk of shares. But it was too late and the company slumped to the FTSE 250 nonetheless.

This makes Anil Agarwal now the 67% owner of Vedanta Resources, a violation of corporate governance norms for a listed public company.

More news on Vedanta’s operations in Zambia coming very soon following a Foil Vedanta research trip.. watch this space.

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