Friday, October 28, 2005

Hindalco charts IPO plans for Birla Minerals

Hindalco, India’s largest metals company, is exploring options to float an initial public offer for its wholly-owned Australian mining unit, Birla Minerals, to reduce the subsidiary’s debt and also fund future mining operations, reports The Economic Times.
“It’s still in the early stages. Our bankers are working on the details and nothing has been finalised,” told a senior executive of the Aditya Birla group.
The options, which could aim at reducing the Aditya Birla group holding in Birla Minerals, could also include a possible listing of the subsidiary in Australia, the executive added.
Hindalco acquired the Nifty Copper Mine in ‘03, along with the rights to explore seven other mines, from Straits Resources for AUD 79.8 million or about Rs 255 crore (Rs 2.55 billion). Later Birla Minerals also acquired Queensland’s Mt Gordon Copper Mine, for close to Rs 65 crore (Rs 650 million).
“In both the deals, a majority part of the acquisition cost, about 60%, was financed by debt, while the balance was met by equity,” the executive said. “It’s to reduce that debt, we’re considering this IPO,” he added. The executive, however, declined to provide details on the size of the debt. The mines were acquired to improve copper concentrate supply to Hindalco’s smelter operations in India.
Copper concentrate is refined electrolytically at smelters to make the metal copper, which is used in industries such as automobiles and in the construction sector.
Hindalco recently expanded its copper smelter capacity at Dahej to 5,00,000 tonnes. Since more than 2.5 tonnes of concentrate is used to make a tonne of copper, Hindalco would currently need about 1.5 million tonnes of concentrate for its expanded smelter. At the time of the acquisition, Hindalco Chairman Kumar Mangalam Birla had said that his company would “like to have about 25-40% of concentrate requirement coming from our own mine.” Hindalco meets the remaining through spot purchase and long term contracts.
Birla Nifty has a capacity of 25,000t of copper cathodes and a large undeveloped copper sulphide resource estimated at around 1.9mt of copper equivalent. The Nifty project has a total resource of 148mt of ore. Hindalco had also conducted a feasibility study for developing an underground mine and a copper concentrate plant with a projected capacity of 2.5mt at Birla Nifty.
Commodity players are currently focusing on increasing their raw material strengths due to expanded facilities and a growing demand from countries such as China and India.
Players in industries such as steel, aluminium, copper and zinc are scouting potential mining deposits for acquisitions. While India has rich reserves of bauxite - used for aluminium production, and iron ore - used in steel, it has very little presence in copper concentrates.


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