Commodity Online
MUMBAI: Sterlite industries Ltd became the hot pick for the investors during the past week, as the company has revised its offer for US-based mining major, Asarco’s copper assets to the tune of USD 1.1 bn.

The company stock witnessed a sharp increase during past one week. At Rs.238 in the beginning of March, the stock was trading at its monthly-low levels. It jumped by more than 15% to Rs. 283 on the closing session on Friday.

For the foreign investors as well, Sterlite remained the top pick among metal stocks in India because of its strong cash rich balance sheet, low-cost profile, increasing market share and rising diversification of earnings.



Sterlite has revised its offer for US-based mining firm Asarco’s (not listed) copper assets, which has been accepted by the lenders and is now placed before the bankruptcy court for final approval.

Sterlite would make an upfront payment of USD 1.1bn and an additional payment of USD 0.6bn spread over a period of 9 years, which would be paid through the earnings of ASARCO over the period of 9 years. According to the deal, USD 0.6bn would be paid with annual installments of USD 20mn from the end of 2nd year for a period of 7 years and a terminal payment of USD 460mn.

As per the deal, which is expected to be completed in the next six months, there is an additional clause that if annual average of daily copper prices in a particular year increases beyond USD 6000 per tonne, then the annual installments would be proportionately increased subject to a maximum of USD 66.67mn, keeping total payment to USD 0.6bn.

ASARCO is the third largest copper mining and smelting company in the US. The company has a history of over 100 years of operations with copper mines, smelting and refining units. The company, which was originally formed as an American Smelting and Refining Company, had filed for bankruptcy protection under Ch-11 of United States Bankruptcy Code on August 9, 2005 as a result of massive asbestos related cases filed against them. The total claims filed against ASARCO stand at USD 8bn.

ASARCO has three open pit copper mines with around 5mt copper in contained reserves and a copper smelter. The plant at Hayden, Arizona also has a capacity to produce 0.9mtpa of
sulphuric acid.

During the first nine months of the current fiscal, Sterlite produced 225,000 tonnes of copper and 20,000 tonnes of copper from Copper Mines of Tasmania. With the addition of ASARCO’s 0.24mtpa copper smelting capacity, Sterlite, with current capacity of 0.4mtpa would have a total capacity of 0.65mtpa.

According to experts, the deal is positive for Sterlite given the mining assets including smelter that it had acquired. Sterlite had said that ASARCO had value added products, which boosts the average realizations

Copper prices too have a positive run ahead, as experts expect it to remain high at USD 3680 to 3700 per tonne in the international market. Copper Futures remained slightly high on the Indian commexes. April copper contract on MCX stood at Rs.189.25, while the metal was traded at Rs.185.65 in the spot markets.

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