Meet the Mining Industry's Newest Mogul: Anil Agarwal

By Scott Patterson Features Dow Jones Newswires

Anil Agarwal began his career as a metals dealer in India nearly 50 years ago. Today, he is a billionaire making one of the biggest bets on the global mining industry's recovery.

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The chairman of India's Vedanta Resources PLC has used a family trust to invest almost $4.5 billion in Anglo American PLC this year, taking control of about 20% of the U.K. mining giant. Along with his controlling ownership of about $2.1 billion in his own company, the stake vaults Mr. Agarwal into a rarefied group of mining investors.

Among individuals, Mr. Agarwal's bet rivals that of Glencore PLC Chief Executive Ivan Glasenberg, whose shares in his own company are worth about $5.9 billion--one of the largest personal stakes in a mining company. Big institutional investors like BlackRock Inc. also have significant stakes in a range of companies, including BHP Billiton PLC and Rio Tinto PLC.

"As an individual, this is a huge position in mining," said Paul Gait, a mining analyst at Sanford C. Bernstein. Mr. Agarwal and a spokesman for Anglo American declined to comment.

Mr. Agarwal's roughly $6.6 billion position in two large mining companies comes amid a broad turnaround in the sector, fueled by demand in China, which consumes about half of most of the world's major commodities. Prices for copper, iron ore, coal and other materials have clocked double-digit increases, luring back many investors who fled mining stocks in 2015. BlackRock's world mining trust has more than doubled in size since January 2016.

Mr. Agarwal, 65 years old, got his start in commodities in the late 1960s, dropping out of school to work as a metals investor in Mumbai, which was then known as Bombay. Seven years later, he founded copper maker Sterlite Industries. In 2003, Vedanta Resources, majority-owner of Sterlite, became the first Indian company to list on the London Stock Exchange.

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But until now, Mr. Agarwal hadn't been seen as a major player outside of India, where he is perhaps best known for pledging to give away 75% of his family's wealth to charity. But even there, Mr. Agarwal tends to keep a low profile. He spends much of his time in London.

That relative anonymity has left investors and analysts wondering what Mr. Agarwal plans to do with his stake in Anglo American, a mining icon founded by diamond and gold magnate Ernest Oppenheimer a century ago.

"At this point, I don't think anybody knows," said RBC capital analyst Tyler Broda.

Some say the billionaire could simply be looking for more exposure to the commodity industry's recovery.

Anglo American returned to profit in 2017 after years of losses and surprised investors by reinstating a dividend it had slashed in 2015 during a gut-wrenching commodity-price slump. Last Thursday, the company's share price hit a three-year high, closing up 17% since March, when Mr. Agarwal announced his first series of Anglo investments. On Tuesday, its stock closed at GBP14.42 in London.

Mr. Agarwal has said in the past he isn't interested in taking over Anglo or forcing a merger with Vedanta.

Analysts have pointed to Anglo American's South African coal, iron ore and platinum assets as one potential motivation for Mr. Agarwal's investment.

Most of Vedanta's business is located in India, where its companies mine coal and iron ore, among other things. But it also has assets in South Africa, as well as Zambia, Namibia, Australia and Ireland. Any sale of Anglo's assets could be attractive for Mr. Agarwal, said Mr. Broda, of RBC.

"If you were to see Anglo with South Africa broken out, perhaps this is a way of getting a foothold in that conversation," he said.

Adding to the speculation: In 2015, Vedanta hired former Anglo American CEO Cynthia Carroll to work on long-term strategy.

Behind some of the confusion over Mr. Agarwal's intentions lies the complex structure of his investment, which was arranged by J.P. Morgan Chase.

Mr. Agarwal's family trust, Volcan Investments Ltd., will issue bonds to investors that can later be converted into shares with a yield of about 4%. Volcan will use the cash from the investment to purchase shares in Anglo, which bond investors can collect in about three years.

The deal's structure puts a three-year limit on Mr. Agarwal's shareholdings. It also caps how much Volcan can win or lose from its holdings.

Mr. Agarwal is "clearly trying to buy himself a seat at the table" at Anglo, said Mr. Gait, of Bernstein. "But can he force something here? That is a much harder proposition given the structure."

Some investors are hoping Mr. Agarwal will shake things up.

"A large shareholder of this type to rock the boat and put more pressure on Anglo's management can't be a bad thing," said Anthony Sedgwick, fund manager at Anglo investor Abax Investments in South Africa.

Write to Scott Patterson at scott.patterson@wsj.com

LONDON -- Anil Agarwal began his career as a metals dealer in India nearly 50 years ago. Today, he is a billionaire making one of the biggest bets on the global mining industry's recovery.

The chairman of India's Vedanta Resources PLC has used a family trust to invest almost $4.5 billion in Anglo American PLC this year, taking control of about 20% of the U.K. mining giant. Along with his controlling ownership of about $2.1 billion in his own company, the stake vaults Mr. Agarwal into a rarefied group of mining investors.

Among individuals, Mr. Agarwal's bet rivals that of Glencore PLC Chief Executive Ivan Glasenberg, whose shares in his own company are worth about $5.9 billion -- one of the largest personal stakes in a mining company. Big institutional investors like BlackRock Inc. also have significant stakes in a range of companies, including BHP Billiton PLC and Rio Tinto PLC.

"As an individual, this is a huge position in mining," said Paul Gait, a mining analyst at Sanford C. Bernstein. Mr. Agarwal and a spokesman for Anglo American declined to comment.

Mr. Agarwal's roughly $6.6 billion position in two large mining companies comes amid a broad turnaround in the sector, fueled by demand in China, which consumes about half of most of the world's major commodities. Prices for copper, iron ore, coal and other materials have clocked double-digit increases, luring back many investors who fled mining stocks in 2015. BlackRock's world mining trust has more than doubled in size since January 2016.

Mr. Agarwal, 65 years old, got his start in commodities in the late 1960s, dropping out of school to work as a metals investor in Mumbai, which was then known as Bombay. Seven years later, he founded copper maker Sterlite Industries. In 2003, Vedanta Resources, majority-owner of Sterlite, became the first Indian company to list on the London Stock Exchange.

But until now, Mr. Agarwal hadn't been seen as a major player outside of India, where he is perhaps best known for pledging to give away 75% of his family's wealth to charity. But even there, Mr. Agarwal tends to keep a low profile. He spends much of his time in London.

That relative anonymity has left investors and analysts wondering what Mr. Agarwal plans to do with his stake in Anglo American, a mining icon founded by diamond and gold magnate Ernest Oppenheimer a century ago.

"At this point, I don't think anybody knows," said RBC capital analyst Tyler Broda.

Some say the billionaire could simply be looking for more exposure to the commodity industry's recovery.

Anglo American returned to profit in 2017 after years of losses and surprised investors by reinstating a dividend it had slashed in 2015 during a gut-wrenching commodity-price slump. Last Thursday, the company's share price hit a three-year high, closing up 17% since March, when Mr. Agarwal announced his first series of Anglo investments. On Tuesday, its stock closed at GBP1,442 in London.

Mr. Agarwal has said in the past he isn't interested in taking over Anglo or forcing a merger with Vedanta.

Analysts have pointed to Anglo American's South African coal, iron ore and platinum assets as one potential motivation for Mr. Agarwal's investment.

Most of Vedanta's business is located in India, where its companies mine coal and iron ore, among other things. But it also has assets in South Africa, as well as Zambia, Namibia, Australia and Ireland. Any sale of Anglo's assets could be attractive for Mr. Agarwal, said Mr. Broda, of RBC.

"If you were to see Anglo with South Africa broken out, perhaps this is a way of getting a foothold in that conversation," he said.

Adding to the speculation: In 2015, Vedanta hired former Anglo American CEO Cynthia Carroll to work on long-term strategy.

Behind some of the confusion over Mr. Agarwal's intentions lies the complex structure of his investment, which was arranged by J.P. Morgan Chase.

Mr. Agarwal's family trust, Volcan Investments Ltd., will issue bonds to investors that can later be converted into shares with a yield of about 4%. Volcan will use the cash from the investment to purchase shares in Anglo, which bond investors can collect in about three years.

The deal's structure puts a three-year limit on Mr. Agarwal's shareholdings. It also caps how much Volcan can win or lose from its holdings.

Mr. Agarwal is "clearly trying to buy himself a seat at the table" at Anglo, said Mr. Gait, of Bernstein. "But can he force something here? That is a much harder proposition given the structure."

Some investors are hoping Mr. Agarwal will shake things up.

"A large shareholder of this type to rock the boat and put more pressure on Anglo's management can't be a bad thing," said Anthony Sedgwick, fund manager at Anglo investor Abax Investments in South Africa.

(END) Dow Jones Newswires

October 12, 2017 07:14 ET (11:14 GMT)