Valuation of Hindustan Zinc in fresh trouble

The Valuation Of Hindustan Zinc Ltd (HZL) has run into a fresh controversy. The ministry of mines is now looking into a complaint alleging that the Sindesar Khurd mining development project, which was at an advanced stage of planning for production with a whop-ping 81 million tonnes of geologically proven ore reserves of zinc, lead and silver clearly indicated in the previous balance sheets of the company, was not considered in the valuation of Hindustan Zinc Ltd (HZL) during the initial stake sale to Anil Agarwal -run Sterlite Opportunities and Ventures Ltd (SOVL).

The complaint, which has been forwarded by the office of the President, also alleges that the project was concealed from the Comptrol-ler and Auditor General of India (CAG) as well when the subsequent audit on disinvest-ment took place.

The value of the reserves of the Sindesar Khurd mines would have worked out to roughly Rs  40,000 crore, according to the complaint. "This mining unit had approximately 81 million tones geologically proven ore reserves of lead, zinc and silver metals that were not considered inten-tionally thereby ben-efiting SOVL," the complaint, lodged by a former HZL official with the President, alleges.

The CAG's audit report after the stake sale had pointed out that the global adviser had treated three HZL mines as non-core assets while the asset valuer in his valuation had assumed that five mines were non-operational and had exhausted heir economic life. The asset valuer had worked out the value of five mines on the basis of 'realizable value' and one mine on the basis of market value.

"As the global adviser had assumed only three mines as non-core, the asset val-uer should have valued not one but three mines on the basis of market value," the CAG report had said. These mines included the Zawar mines, Rajpura Dariba and Rajpura Garucha mines of HZL, which according to the complaint, are still in pro-duction and could contain as much as Rs  80,000 crore worth of metals. The complaint fur-ther states that "normally, after closure, the lease of Maton Rock-Phosphate mines should have been sur-rendered to the mining department of the Rajasthan government, but in this case, it has not happened.

Courtesy: Mail Today