MAC: Mines and Communities

Articles on Indian companies' overseas ambitions

Published by MAC on 2004-03-11

Jindal's plan to acquire equity coal in Australia

The Economic Times India

Thursday, March 11, 2004

Mumbai: The Sajjan Jindal controlled JVSL is planning to pick up equity coal in an Australian coal mine, to tide over the raw material shortage that threatens to cripple the steel industry.

“The group is currently evaluating the mine and will spend roughly $20 million for the acquisition,” Jisco managing director Sajjan Jindal said.

About 2 million tonnes per annum of JVSL's expected demand of 4 million tonnes will be sourced from the mine, relieving pressures on the supply side. The deal is expected to be concluded in about six months, he said.

JVSL will pick up equity as part of an international consortium that currently operates the mine for a 30 to 50 year term, Mr Jindal said. Prices of raw materials like coking coal, metcoke, scrap or sponge iron and iron ore have sky-rocketed over the last two months crossing 20-year highs.

Acquiring coal mines was one way of taking care of volatility problems, Mr Jindal said.

Another strategic move is to enter into long term contracts with shippers. The company is planning to sign a 20 year shipping contract with shippers to ensure that freight rates were not beyond control. Spot freight rates have spiralled from $10 a tonne to $35 levels in the past six months, he said “The plan is to form an SPV (special purpose vehicle) for about six vessels and take a 15-20% stake in the venture, Mr Jindal said.. Commenting on the government move to regulate steel prices, Mr Jindal said the industry has agreed to freeze prices till June. There is little that the government can do to help ease the raw material sourcing problem, but it can canalise iron ore exports.

“Iron ore of over 60% iron content should not be allowed to be exported,” he said.

The higher grades should be reserved for India. Mr Jindal also said the financial institutions should review their decision to limit exposure to the steel industry.

Companies which are pre-paying their debt should be allowed to expand, he said.

New steel makers like Jindals, as well as older companies like SAIL and RINL are facing severe pressure from rising input costs, industry analysts say. While SAIL is self sufficient in iron ore, RINL may have to shell out about Rs 750 crore per annum on increased coal and ore prices.

Vedanta in a bear hug, scrip falls 12%

Abhinaba Das & Bodhivista Ganguli, The Economic Times India

March 02, 2004

Mumbai: Even as the surge in international commodity prices and demand continues unabated, Vedanta Resources, the first Indian entity to be listed on the London Stock Exchange, is having a torrid run on the bourse.

The Anil Agarwal-controlled non-ferrous metals major, which made its debut on the LSE late last year following a £507m mop-up, has been on a downhill journey, shedding around 12% ever since. The fall in the scrip has been particularly pronounced since the last week as the share price fell from £3.6 to £3.43 during the period.

The Vedanta Resources IPO, which was the second largest on the LSE last year, was priced at £3.9 per share. Vedanta Resources, through its wholly-owned arm Twinstar Holdings, currently owns 65.8% in Sterlite Industries and 80% in Madras Aluminium. Sterlite Industries, in turn, holds a 51% stake in Bharat Aluminium (Balco), the third largest aluminium company in India and a 65% holding in Hindustan Zinc, the country’s largest zinc producer.

Vedanta Resources’ high-profile chairman Brian Gilbertson, who earlier had a stint with the world’s biggest natural resources group BHP Billiton as chief executive, said last week that the fall in the share prices was largely due to the Union government’s “unexpected” move to reduce import duty, and a case pending in the Indian Supreme Court directed against India ’s privatisation programme “which received a lot of publicity in the UK .”

Mr Gilbertson, at that time, had said he expected the downtrend in the share price to be arrested, but the decline has only gathered pace since last week. The FTSE 100 has gained around 2% during the past three months.

Some analysts feel the fall in the share price of Vedanta could have also been impacted by the “image problem” of the group, which in the past ran into problems with the Securities & Exchange Board of India (Sebi). The company’s “controversial” move to delist shares from the Bombay Stock Exchange with a buyback scheme in which the offer price was a substantial discount to the book value had also invited a lot of criticism. Their plans to transfer the copper business and investments out of Sterlite Industries to another company, Sterlite Copper, also had to be dropped due to shareholder opposition.

“Whatever happened in the past is past. All I can say is that from now on, the company will adhere to the highest standards in corporate governance,” Mr Gilbertson said.

Analysts say, while there could be some “hiccups” in the short-term, the outlook for the stock will be positive in the medium to long term. “Overall interest in the mining sector is very high. Vedanta is well placed to reap the benefits in the long-run,” said an analyst.

Global prices of aluminium, copper and zinc — the group’s main businesses — are on a high and the outlook appears positive with China acting as the main demand driver.

International copper prices at $3,000 per tonne are at a seven-year high, while aluminium prices have shot up to $1,700 per tonne, which is at a two-and-a-half year high. Zinc prices have also surged to $1,125 per tonne, the highest in the past three years. Vedanta Resources has lined up plans to invest $2bn over the next three years in greenfield projects and to expand current operations. The company, through its Indian subsidiaries and associates, control 62% marketshare in zinc, 42% in copper and 21% in aluminium in India.

Birla Copper expands; acquires mines in Australia


11th March 2004

New Delhi: Birla Copper will raise output gradually over the next year after expanding capacity to 250,000 tonnes a year from 150,000 tonnes, a top company official said on Thursday. The company have also acquired two mines in Australia, he added.

"We have just completed the expansion in February and now the ramp-up has to start. In about a year's time, we should ramp up (to full capacity)," P. Balakrishnan, executive president of Birla Copper, told reporters on the sidelines of a copper seminar in New Delhi.

Birla Copper is a unit of Hindalco Industries Ltd, India's largest aluminium producer.

"Hindalco's copper unit this year should export around 80,000 tonnes of copper. Last year, we did around 75,000 tonnes," he said.

He said India's copper exports in 2003/04 should total between 120,000 and 150,000 tonnes against the previous fiscal year's 120,000.

"I would expect copper production in the country in 2003/04 to be around 400,000 tonnes compared with 370,000 tonnes in the previous year," Balakrishnan said.

India produced 328,123 tonnes of copper between April 2003 and January 2004, up from 315,275 tonnes in the year-earlier period.

Sterlite Industries Ltd and state-run Hindustan Copper are the other leading copper producers.

Balakrishnan said one of the two mines that Birla Copper had acquired in Australia was expected to start production later this year. The other would start in 2005, he said.

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