Date | Dec 07, 2015: Hindalco Industries Ltd is planning to sell its sole copper mine to focus on its smelting business in India, a company executive said on 25 November.
In September, Aditya Birla Minerals Ltd (ABML), a Hindalco subsidiary in Australia, sold its Mt Gordon copper mine for A$15 million, less than the A$21 million it paid for it in 2003. Nifty, its other Australian mine that supplies 10% of the raw material required for the parent firm’s smelter at Dahej in Gujarat, may be the next.
“The company wants to focus on the copper smelting business in India and exit from any backward integration. We continue to review options including sale and if we get the right price, we would like to dispose off,” said the executive, who did not wish to be identified.
In October, ABML appointed Moelis Australia Advisory Pty Ltd to assist in a strategic business review, in which all options including sale will be considered. “Whatever copper mines we have is through ABML; we have already disposed one and the remaining is under rejig,” said the executive quoted earlier.
If a sale goes through, Hindalco will replace the copper concentrate sourced from Nifty through imports, he added.
Since the beginning of the year, the price of copper on the London Metal Exchange has fallen 27.91% from $6,368 to $4,591 per tonne. “Copper concentrate is linked to LME and the price is similar everywhere; frieght involved will decide the final cost,” the official said.
Meanwhile, copper mine auctions in India are coming up. “When that happens (auction guidelines are out), we will have an open mind and definitely review if it makes business sense,” the official said.
An email sent to Hindalco Industries and ABML on Wedn-esday remained unanswered.
To be sure, ABML has at least one serious buyer for its Nifty mine. After ABML said it has appointed Moelis for a business rejig, Australia’s MetalsX Ltd, a diversified resource company, offered to take over ABML by exchanging one MetalsX share for five ABML shares.
“The offer is equivalent to $0.274 per Aditya Birla share compared to the closing price of $0.17 per share yesterday,” MetalsX’s 15 October statement on the Australian Securities exchange said. The ABML board in November rejected the offer, saying it is inadequate and fails to recognize the value of Nifty mines and ABML’s portfolio of exploration copper assets.
An email query sent to officials at MetalsX on Wednesday remained unanswered.
Earlier in May, MetalsX had written to Aditya Birla to commence merger discussions, but failed to initiate any, MetalsX said in the 15 October statement.
Kameswara Rao, executive director and leader of energy, utility and mining practice at consulting firm PricewaterhouseCoopers Pvt. Ltd, sees MetalsX’s interest in ABML as opportunistic.
“Mid-tier miners are always hungry for assets that add to growth platforms they are building. As copper prices have continually declined over the last 4-5 years, companies find it increasingly hard to commit funding to develop new mines and may seek to exit,” he said.
Meanwhile, Hindalco is facing the heat of the commodity meltdown. In the July-September quarter, it reported a 30% incre-ase in standalone net profit of Rs.103 crore, compared with Rs.79 crore in the same period last year, helped by higher other inc-ome and an exceptional charge in the comparable quarter last year. Its earnings before interest and taxation, for both its copper and aluminium businesses, were lower than a year ago.
Hindalco’s copper smelting business is expected to see more headwinds ahead.
“Indian copper companies gain from treatment and refining charges (TCRC) and the TCRC margins next year would be lower than what they enjoy this year as copper prices have fallen sharply. TCRC margins follow the copper price trend sooner or later,” said a metals analyst with a foreign brokerage firm, who did not wish to be identified. He expects the asset sale to help ease Hindalco’s liquidity woes.
(Source: http://www.livemint.com/)