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Sterlite Industries Overweight
STRL.BO, STLT IN
Site Visit Day 2- Zinc operations- SK mine, smelter visit
• SK mine ramp up on schedule: We visited the underground Sindesar
Khurd mine (180ppms of silver), which is the cornerstone for increasing
silver production. Current mine production has reached a monthly run
rate of 0.1MT (implying 1.2MT annual production) and the company
expects to it to ramp up to 2MT in H2 FY12E. While it is an
underground (UG) mine, mechanization levels are relatively higher
compared to its other UG mines and there is not a significant increase in
overall mining cost per MT of metal (current mining cost at $300/MT of
zinc). Company plans to exit FY11E with 180tonnes of silver production
and expects 400tonnes in FY12E with exit production rate of 500tonnes.
A new 350 tonne silver refinery is scheduled to be commissioned soon.
The company also expects improvement in silver recovery rates to
benefit silver production.
• Lead smelter to be commissioned soon: We continue to be impressed
by the speed of execution by the company on complex projects.
Yesterday we saw the 1.25MT aluminum smelter mostly ready in just
under 2 years. Today we visited the Dariba lead and zinc smelter where
during our last visit in March-09 work had just started. The zinc smelter
is up and running while the lead smelter should get commissioned soon.
• Zinc CoP to move up on higher coal costs: Given that coal costs are
nearly $240/MT of zinc, we expect zinc CoP to increase from reported
Dec-10 quarter levels of $792/MT (excluding royalty) mainly on coal
cost inflation (import component relatively higher at 50%). The company
highlighted that water issues have been resolved (they had impacted
production in H1).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sterlite Industries Overweight
STRL.BO, STLT IN
Site Visit Day 2- Zinc operations- SK mine, smelter visit
• SK mine ramp up on schedule: We visited the underground Sindesar
Khurd mine (180ppms of silver), which is the cornerstone for increasing
silver production. Current mine production has reached a monthly run
rate of 0.1MT (implying 1.2MT annual production) and the company
expects to it to ramp up to 2MT in H2 FY12E. While it is an
underground (UG) mine, mechanization levels are relatively higher
compared to its other UG mines and there is not a significant increase in
overall mining cost per MT of metal (current mining cost at $300/MT of
zinc). Company plans to exit FY11E with 180tonnes of silver production
and expects 400tonnes in FY12E with exit production rate of 500tonnes.
A new 350 tonne silver refinery is scheduled to be commissioned soon.
The company also expects improvement in silver recovery rates to
benefit silver production.
• Lead smelter to be commissioned soon: We continue to be impressed
by the speed of execution by the company on complex projects.
Yesterday we saw the 1.25MT aluminum smelter mostly ready in just
under 2 years. Today we visited the Dariba lead and zinc smelter where
during our last visit in March-09 work had just started. The zinc smelter
is up and running while the lead smelter should get commissioned soon.
• Zinc CoP to move up on higher coal costs: Given that coal costs are
nearly $240/MT of zinc, we expect zinc CoP to increase from reported
Dec-10 quarter levels of $792/MT (excluding royalty) mainly on coal
cost inflation (import component relatively higher at 50%). The company
highlighted that water issues have been resolved (they had impacted
production in H1).
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