The Hindu Business Line : ‘Asarco, a low-cost producer of copper’

Chennai, May 31 The plant of Asarco, which Sterlite may take over after completion of formalities, is one of the least cost producers of copper, a spokesman of the company said.

The acquisition will give Sterlite a “fantastic” boost to its margins, the spokesman said.

He said that the cost of production of copper at Asarco was around $1.5 a pound. At this rate, it would yield an EBIDTA margin of $4,700 a tonne, at the current ruling prices of the metal. Copper prices closed on the London Metals Exchange at $8,175 a tonne on Friday.

Including the production from Asarco-owned Amarillo copper mines in Texas, the acquisition could add 5 lakh tonnes to Sterlite’s existing capacity of 4 lakh tonnes. In fact, the capacity of the Amarillo mine is twice the current level of production of around 2.3 lakh tonnes. “This mine alone has the potential to turnaround the whole company,” the spokesman said.

He noted that this acquisition was considerably cheaper than another recent acquisition — of the Brazilian Cumerio mines by Nord Deutsche. Nord Deutsche bought it paying close to seven times the EBIDTA, whereas Sterlite has struck a deal at around four.

It is learnt that the Asarco deal was brought to fruition by a team headed by Mr C.V. Krishnan, who looks after Sterlite’s business development from New York.

Asarco had two legacy problems, one pertaining to environment-related litigations and the other, labour issues. (In fact, a cursory read of Wikipedia shows a long history of environment-related wrangles, starting from 1910.)

According to the Sterlite spokesman, the company’s acquisition of the operating assets — mine, smelter and refinery — has been ring-fenced from the legacy green issues.

On labour problems, the spokesman noted that the Vedanta Group (to which Sterlite belongs) has a track record of settling such issues after takeovers — as it happened, he pointed out, in the cases of the acquisitions of Balco, Hindustan Zinc and Konkola Copper Mines in Zambia.

“There have been voluntary separations but not a single person has ever been fired,” he said.

Asked if the acquisition would add to the group’s gold production, the spokesman pointed out that while Asarco has a precious metal refinery, only small quantities of gold and molybdenum would be extracted.

Vedanta is putting up a 20-tonne gold refinery at Dubai, which will extract the yellow metal out of the sludge that the Tuticorin copper smelter generates. The spokesman said that the quantity of gold contained in the sludge of the Asarco smelter would not justify its shipping to Dubai.

Sterlite also produces 100 tonnes of silver, which comes as a by-product in the production of zinc.

This is slated to rise five-fold in three years as the zinc mine in Rajasthan is being expanded.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Southwest monsoon sets in over Kerala

W. Australia welcomes Indian migrants

Air India hikes fuel surcharge

Services sector can access ECBs

Weekly News Round-up

Duty drawback on iron, steel, rice, cement goes

Decision on fuel price remains open

Sterlite wins bid for Asarco

‘Asarco, a low-cost producer of copper’