The Hindu Business Line : Sterlite has support for US copper co Asarco

Chennai, July 4 Confident of taking over the US copper mining company Asarco, Sterlite Industries believes that the US bankruptcy judge allowing Asarco’s parent, Grupo Mexico, to submit a reorganisation plan, is nothing more than a formality.

Sources in Sterlite note that if Grupo Mexico said it would submit a reorganisation plan, no judge would want to say ‘no’ to it. Some also note that if Grupo Mexico could turnaround Asarco, it would have done so already.

Logic apart, Sterlite’s confidence is reinforced by the support it has got from several other stakeholders in Asarco — unions, board of directors, creditors and even the Federal government, according to sources in the company. Observers also point out that Sterlite cannot be denied to raise its bid.

Analysts feel that Sterlite, which is sitting on a $1.8 billion of cash raised through a recent ADS issue, will not give up the fight, not in the least because it needs copper mines.

At present, its captive mines in Australia supplies only 7 per cent of its smelting capacity (of 400,000 tonnes at Tuticorin). The Mt Lyell mines in Australia is also expected to close down in 2012. Asarco’s mines have 5 million tonnes of contained copper.

In the copper business, the advantages alternates between mine owners and smelters, but integrated producers always have an edge.

Sterlite is almost entirely a custom-smelter. It buys copper concentrates and produces pure metal in the form of cathodes, rods and wires. It earns ‘treatment charges, refining charges’ (TcRc) for this job. The TcRc rates tend to fluctuate. For example, it was 23.1 cents a pound (weight) in 2006 (average), 31.1 cents in 2007 and 15.7 cents last year. Sterlite expects a further fall in the current year to around 11 cents.

Cost of smelting and refining has also been going down — from 6.1 cents a pound in 2007 to 1.8 cents last year, but the drop in TcRc is steeper. (Actually, the cost of production does not include the credits gained from by products such as sulphur and gold, counting which the cost will be negative.)

But if Asarco comes into Sterlite’s fold, the company will be more integrated in operations (on a consolidated basis). The option of acquiring any other copper mine is practically not there today, as with the prices of the metal shooting over $8,500 a tonne (three months delivery), the valuations for mines have gone through the roof.

Sterlite Energy

Meanwhile, Sterlite Industries’ wholly-owned subsidiary Sterlite Energy has decided to move its registered office to Tuticorin, Tamil Nadu from Mumbai. Sources in Sterlite said this was due to administrative reasons.

They said the move had nothing to do with Sterlite Energy’s plans for projects in Tamil Nadu, which are a long way away. The company is putting up a 2,400 MW coal-based power project at Jharsuguda in Orissa.

Related Stories:
Sterlite wins bid for Asarco

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

Stories in this Section
Fresh whirl over northwest Bay by Sunday

Direct tax collections up 38.6% in Apr-June

Markets this week

Forex reserves accretion trickles down; it’s only $656 m in April-June quarter

Will the RBI probe and unravel the derivatives scam?

Mutual funds make big purchase in June

Samajwadi Party supports Govt on nuclear deal

Investors see greater value in paper gold

Sterlite has support for US copper co Asarco

RCom alleges price hammering in shares, seeks SEBI probe

The flight of top talent continues to dog firms

SEBI disgorges Rs 80.34 lakh from 33 entities

‘Majority of security breaches are insider job’

Truckers’ strike called off