The Hindu Business Line : Hindalco looking for copper assets in Zambia

On the radar
Particularly keen on Luanshya, Baluba mining assets.
Aditya Birla group says an evaluation process is on.
Eyeing opportunities in S. America as well.

Jayanta Mallick

Kolkata, Nov. 30 Aditya Birla Group is keen on Zambian copper mining assets, particularly Luanshya and Baluba, which were once taken over by London-based NRI metal trader Mr Gokul Binani in 1997 from the State-owned Zambia Consolidated Copper Mines Ltd (ZCCM) but who after a few years made a messy exit, after which the operating company went into liquidation.

Speaking to Business Line here on Friday, Mr Debu Bhattacharya, Managing Director of Hindalco and the top official in base metal operations, confirmed that. “We are closely looking at the mining assets in Zambia,” he said, and added that an evaluation process was on.

The Luanshya and Baluba mines produced 48,345 tonnes of copper in concentrate and 1,216 tonnes of cobalt in concentrate during the financial year ended March 31, 1997 before privatisation. The assets are now under receivership of Grant Thornton.

Mr Bhattacharya, who is also Vice-Chairman of Novelis Inc, said that the group was looking for opportunities in South America too to pick up copper mining assets. “Not many such assets are available for acquisition worldwide currently,” he said, and indicated that a number of copper mines in Columbia, Peru and Argentina were on the group’s radar.

The group is aggressively attempting to enhance its copper resource ownership in relation to the in-house finished capacity.

“Though we have adequate long-term coverage in bauxite, our current coverage in copper is around 40 per cent, which we now target to increase it to 60 per cent,” he said, without specifying a timeframe. All the group’s applications for fresh bauxite mining rights were at an “advance stage” of processing.

Novelis legacy losses

Mr Bhattacharya said the losses on account of legacy contracts incurred by Novelis Inc before acquisition, could be wiped out fully within a year. Novelis, now part of the Aditya Birla group, had incurred losses of about $120 million associated with its legacy contracts during the first six months of 2006.

In an SEC filing, the US company in August 2006 had admitted that “depending on the fluctuations in metal prices for the remainder of 2006 and other factors, we may continue to incur losses on sale under these contracts”.

Mr Bhattacharya said after the takeover that the financial performance of Novelis, particularly related to costs, has been showing signs of improvement. The accounting year of Novelis has been changed to April-March from January-April to align it with that of the group.

No Re-$ parity risk

He said that neither Hindalco nor Novelis was affected by the sharp increase in rupee against the dollar this year because of two reasons — full cost pass-on to the buyers and absence of cross subsidisation in case of intra group transactions of metal and material.

He felt aluminium was in an upward leg of a long-term cycle and the current cycle could be better than the previous one.

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