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Sterlite Industries Overweight; STRL.BO, STLT IN
Completes Anglo's zinc assets acquisition; $383MM in EBITDA in FY12
• Sterlite wraps up acquisition of all Anglo assets with completion of
Lisheen Mine acquisition: Sterlite acquired the Lisheen Mine in Ireland
from Anglo American for a total consideration of $546MM, which
includes ~$275MM cash available at Lisheen. The acquisition completes
the Anglo zinc assets purchase, which included Skorpion mine
(completed in Dec-10 for $707MM) and 74% of Black Mountain mine
(completed earlier this month for $348MM), for a total consideration of
$1.6bn ($1.326 excluding the cash available at Lisheen). This is part of
the proposed acquisition of Anglo's zinc assets acquisition announced in
May-10 for $1.338bn for 3 mines Skorpion (2009 prod of 150kt, 8.3Mt
reserves, Zn grade 11.3%, CoP$902/mt), Black Mountain + Gamsberg in
South Africa (Black Mountain- 2009 prod of 57kt, 189Mt reserves, Zn
grade of 1.5%, CoP$1237/mt) and Lisheen.
• Lisheen is a high-grade resource base: Lisheen is a high-grade
underground mine with total R&R of 8.7MT (avg. Zn content of 11.9%
and Pb content of 1.9%). At 2009 production levels at the mine (172kt
Zn and 19kt Pb), the average life of the mine is ~6 years. The mine
contributed nearly 45% of 2009 revenue from the 3 mines, but given the
high CoP for the UG mine ($1287 vs. $902 at Skorpion), EBITDA
contribution was 34%. Based on a 15% escalation in 2009 CoP and
realization of $2160/MT, we expect Lisheen to contribute $150MM to
FY12E EBITDA (39% of the EBITDA from the 3 mines).
• Recent accident in Lisheen mine suspended operations: Earlier this
month, there was an accident in the Lisheen mine due to an explosion in
the mine shaft. The operations in the mine were suspended to fully
investigate the cause of the accident.
• Anglo’s zinc asset acquisition to contribute 11-13% of FY12-13E
EBITDA: As highlighted previously, the acquisition is through Sterlite’s
fully owned subsidiary Sterlite Infra. With the completion of the
acquisition, we include it in our earnings from FY12E. Assuming a Zn
price of $2300 for FY12 and a 15% escalation in the 2009 CoP of the
zinc assets, we expect the full acquisition to contribute $383MM in
FY12E. We assume a modest decline in Zn prices in FY13E, and
therefore, expect the assets to generate $363MM in EBITDA in FY13E.
• Zinc earnings to improve going forward: We expect Sterlite's Zinc
segment will show operational improvement going forward. First, the
progress in completing the Anglo zinc asset acquisition should start
flowing through from FY12E. Second, Zn production at majority-owned
HZL (Not Rated) should pick up from its current levels of 178kt/quarter
to 200kt/quarter.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sterlite Industries Overweight; STRL.BO, STLT IN
Completes Anglo's zinc assets acquisition; $383MM in EBITDA in FY12
• Sterlite wraps up acquisition of all Anglo assets with completion of
Lisheen Mine acquisition: Sterlite acquired the Lisheen Mine in Ireland
from Anglo American for a total consideration of $546MM, which
includes ~$275MM cash available at Lisheen. The acquisition completes
the Anglo zinc assets purchase, which included Skorpion mine
(completed in Dec-10 for $707MM) and 74% of Black Mountain mine
(completed earlier this month for $348MM), for a total consideration of
$1.6bn ($1.326 excluding the cash available at Lisheen). This is part of
the proposed acquisition of Anglo's zinc assets acquisition announced in
May-10 for $1.338bn for 3 mines Skorpion (2009 prod of 150kt, 8.3Mt
reserves, Zn grade 11.3%, CoP$902/mt), Black Mountain + Gamsberg in
South Africa (Black Mountain- 2009 prod of 57kt, 189Mt reserves, Zn
grade of 1.5%, CoP$1237/mt) and Lisheen.
• Lisheen is a high-grade resource base: Lisheen is a high-grade
underground mine with total R&R of 8.7MT (avg. Zn content of 11.9%
and Pb content of 1.9%). At 2009 production levels at the mine (172kt
Zn and 19kt Pb), the average life of the mine is ~6 years. The mine
contributed nearly 45% of 2009 revenue from the 3 mines, but given the
high CoP for the UG mine ($1287 vs. $902 at Skorpion), EBITDA
contribution was 34%. Based on a 15% escalation in 2009 CoP and
realization of $2160/MT, we expect Lisheen to contribute $150MM to
FY12E EBITDA (39% of the EBITDA from the 3 mines).
• Recent accident in Lisheen mine suspended operations: Earlier this
month, there was an accident in the Lisheen mine due to an explosion in
the mine shaft. The operations in the mine were suspended to fully
investigate the cause of the accident.
• Anglo’s zinc asset acquisition to contribute 11-13% of FY12-13E
EBITDA: As highlighted previously, the acquisition is through Sterlite’s
fully owned subsidiary Sterlite Infra. With the completion of the
acquisition, we include it in our earnings from FY12E. Assuming a Zn
price of $2300 for FY12 and a 15% escalation in the 2009 CoP of the
zinc assets, we expect the full acquisition to contribute $383MM in
FY12E. We assume a modest decline in Zn prices in FY13E, and
therefore, expect the assets to generate $363MM in EBITDA in FY13E.
• Zinc earnings to improve going forward: We expect Sterlite's Zinc
segment will show operational improvement going forward. First, the
progress in completing the Anglo zinc asset acquisition should start
flowing through from FY12E. Second, Zn production at majority-owned
HZL (Not Rated) should pick up from its current levels of 178kt/quarter
to 200kt/quarter.
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