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Sterlite Industries (Sterlite) has announced the completion of acquisition of 74%
stake in Black Mountain zinc-lead mines in South Africa for USD 348 mn. This is the
second asset acquisition as part of the acquisition of the zinc-lead business of Anglo
American. In December 2010, Sterlite had acquired Skorpion mine for USD 707 mn.
Acquisition of Lisheen mine in Ireland for USD 308 mn, announced earlier, is
pending.
Details of Black Mountain assets are as follows:
• Mines with reserves and resources of 52 mt with 1.5% zinc and 2.9% lead
content.
• 2009 zinc and lead production was 21 kt and 36 kt, respectively. CY09 zinc cash
cost of production was USD 1,237/t.
• Gamsberg zinc mine has reserves and resources of 138 mt. It is under
development currently with the potential to produce 400 ktpa zinc
Our view
We believe this acquisition is likely to positively impact FY12E consolidated
EBITDA by only 1.5-2.0%. The implied EV/EBITDA is ~5.5x, which is marginally
on the lower side considering the low cash cost and the current size of reserves
and resources. However, future scale up will depend upon development of the
Gamsberg zinc mine, considering it has one of the world’s largest zinc deposits.
Management has also indicated potential for increasing production from existing
mines, including extending life of Black Mountain mine beyond 2020. Pending
greater clarity on such a scale up, the impact on estimates and our fair valuation
of INR 205/share for the stock is marginal.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sterlite Industries (Sterlite) has announced the completion of acquisition of 74%
stake in Black Mountain zinc-lead mines in South Africa for USD 348 mn. This is the
second asset acquisition as part of the acquisition of the zinc-lead business of Anglo
American. In December 2010, Sterlite had acquired Skorpion mine for USD 707 mn.
Acquisition of Lisheen mine in Ireland for USD 308 mn, announced earlier, is
pending.
Details of Black Mountain assets are as follows:
• Mines with reserves and resources of 52 mt with 1.5% zinc and 2.9% lead
content.
• 2009 zinc and lead production was 21 kt and 36 kt, respectively. CY09 zinc cash
cost of production was USD 1,237/t.
• Gamsberg zinc mine has reserves and resources of 138 mt. It is under
development currently with the potential to produce 400 ktpa zinc
Our view
We believe this acquisition is likely to positively impact FY12E consolidated
EBITDA by only 1.5-2.0%. The implied EV/EBITDA is ~5.5x, which is marginally
on the lower side considering the low cash cost and the current size of reserves
and resources. However, future scale up will depend upon development of the
Gamsberg zinc mine, considering it has one of the world’s largest zinc deposits.
Management has also indicated potential for increasing production from existing
mines, including extending life of Black Mountain mine beyond 2020. Pending
greater clarity on such a scale up, the impact on estimates and our fair valuation
of INR 205/share for the stock is marginal.
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