Vedanta Resources

Indian billionaire Anil Agarwal announced a bold ambition. Mr. Agarawal announced that he wanted to build an Indian commodities/resource conglomerate that would rival the world. Not only was his personal familiar success not impressive enough he wanted to build a legacy. The founder and owner of Vedanta resources a diversified metals and energy and oil and gas company with revenue of $11 billion.

This powerhouse company was founded in 1976 and currently has its headquarters in London. The story of Vedanta is one of a small-town metals business in Northern India that would become a London stock exchange listing in 2003. The incredible rise and development of the company did not come without considerable issues which are still in the spotlight today. Vedanta is the largest metals and mining company in India, but such success is only matched by this leader’s desire to provide a giant commodity platform for his country. Mr. Agarawal wants to curb the reliance on imports, increase jobs for his people and increase the overall standard of living in India.

India’s economy is expected to triple by 2030 to a staggering $10 trillion dollars according to a talk at the KPMG Et Global Business Summit 2018. The goal for India is to focus on growth in its resource sector, to utilize its natural geography for the betterment of its people. He believes that he can increase the mining sectors 2.5% position in GDP to 10%. This type of accelerated growth has come with issues as hinted above.

“…not even 10% infrastructure has been made so 90% infrastructure is needed. For every country, infrastructure is the catalyst to start the economy. Number two, India has a tremendous base of natural resources whether it is oil, gold, copper, or iron ore and not even 2% has been explored yet.”

This aspiration has not come without great concern. The goal of the company is stated as to improve the lives of the poor, but its stock is down 25% since the start of the year as environmental concerns plague the company. It is a personal mission statement for Mr. Agarawl to improve the lives of his nation and people but past deaths and concerns over pollution have plagued the company. Only yesterday official from the Indian state of Tamil Nadu have ordered the permanent closure of the country’s largest copper smelter. This closure resulted in the tragic deaths of 13 people at the hands of police. The people blame the mine for polluting the water and air since the smelter was established in 1996. They also were concerned that further expansion of the mine and aggressive output would cause greater risk. Pretty reasonable concerns. The Chairman and founder Anil Agarwal said Monday Vedanta was a “victim of fake activism”.

“Anti-development associations. . . are time and again raking up the sentiments of the public for their vested interests that have now cost the lives of innocent people,” he told India’s Economic Times. “They wish to destabilise Indian industry.”

I love a good conspiracy, and the above statement could open a myriad of incredible ones that would rival a Hollywood movie... Or possibly regulations in India are far too lax, and conditions not safe enough for such a massive project? What this story does conjure is the question are we as a country doing what we can for the people? Is your government encouraging growth in our main resource sector? Rightly, or wrongly we see the pipeline going forward; but, are we ignoring the mining sector?

At first blush it would seem like we are not doing enough, that there are no strategic plans that would rival Vedanta’s goal. The mainstream media is not in love with mining for a variety of reasons and I will not bemoan that, but the fact remains, this country is rich in mining and has the potential to increase production for the desperately needed demand from the likes of India and China, even the deteriorating US infrastructure. Are we investing in our natural advantage and are we promoting this resource rich country?

Yes and no.

In the Yukon alone, the federal government is contributing up to $247,381,000 to the Yukon Resource Gateway Project. This is an outstanding pledge to help develop this resource rich area. This alone should be a signal to investors that there is good potential in that mining rich location. The majority of this will be going to upgrade roads, bridges and other transportation to mining sites and camps. It can safely be assumed that such a large investment suggests fantastic potential for the area. It also suggests that the available data the government has is vast and deep for them to commit to such a development tells me that there are aspirations to build our mining sector. I already know from some of the companies up there and in that region towards in the Golden triangle that there is potential for huge growth. But are Canadians aware?

Knowing that the intent for India to not want to rely on imports should spark the same consideration for Canadians. Why are there not more incentives for the people to invest, to build business and develop business in our natural advantage? We have remarkably good environmental standards, a strong need for employment and investment capital tied up in too many passive investment banking products. We should encourage investment in surveying as countries like Australia have done. I was speaking with a geologist who mentioned that the government spent somewhere around $60 million on cloud data gathering through aerial survey. This data is continuously updated as any company, regardless of discovery, reports to the cloud the data from drill results. This investment may sound onerous at first glance but mining in New South Wales brought in $10 billion in 2016-2017.

What we need is to take a step back and remember what has helped to build this nation. A pioneering, wildcat, frontier spirit that took calculated risk. We have been gifted with abundant resources and have an excellent opportunity with solid commodity prices to jump out of helicopters with mining picks, conduct surveys, gather assays and data and build the roads and infrastructure to provide power to future mines. The Canadian government ahs done part of the job already. That enormous investment is a clear signal. There are future mines up here. What is needed is people to stop being so passive with their investments. There is risk in discovery but that is where your risk capital as Canadians should go. Talk with your advisor and if they are tied by regulations then get an online account and consider a small investment in well researched plays in safe, regulated markets. Have the vision Vedanta must produce the metals the world needs but keep the money here in the well regulated, environmentally responsible, regulated and consistent market.

Securities Disclosure: I, Andrew O’Donnell, hold no direct investment interest in any company mentioned in this article.

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