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P o s i t i v e m o v e … .
Sesa Goa plans to acquire 51% stake in Western Cluster Limited (WLC)
(Liberia), for a cash consideration of US$90 million (~|400 crore). Elenilto
Minerals & Mining LLC (Elenilto), had participated in a bid for the
development of the Western Cluster iron ore deposits pursuant to a
tender floated by Government of Liberia (“GOL”). Elenilto was declared as
the winner and would need to carry out development of project as per the
provisions of a Mineral Development Agreement (“MDA”) executed with
the GOL. Now Elenilto along with Sesa Goa will develop the assets of
WLC which are as follows viz., 1) The Mano river (80 MT reserve base
with 51.4% Fe grade), 2) The Bomi Hills (50 MT reserve with 68% Fe
grade ) and 3) The Bea mountains (923 MT reserves with 37% Fe grade).
The company has indicated that of the total reserve base of ~1.0 billion
tonnes the saleable product would be ~330 million tonnes. Currently
acquisition of the 51% majority stake is subject to ratification of the MDA
by Legislature of Liberia. We believe this is positive move however we do
not see any immediate contribution coming in from these assets, we
maintain our target price of | 294/ share and upgrade our rating to BUY.
ƒ Fair Valuation
As per few media reports the cost of developing this mine will be
~$1.6 billion, which on an EV/tonne valuation (of saleable reserve)
will give us a price multiple of ~$4.8/tonne. We believe that the deal
is fairly valued as the management has indicated that the iron ore
grade would be higher one (63Fe content). Currently the project is
subject to ratification of Liberian government and after the approval
as per management guidance it will take two years for the company
to begin the first shipment. However, we are not factoring this in our
current estimates.
V a l u a t i o n
At the CMP of | 319, the stock is trading at 5.5x and 4.9x its FY12E and
FY13E EV/EBITDA, respectively. We believe this deal is positive for Sesa
and upgrade our rating to BUY, maintaining our target of |294
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
P o s i t i v e m o v e … .
Sesa Goa plans to acquire 51% stake in Western Cluster Limited (WLC)
(Liberia), for a cash consideration of US$90 million (~|400 crore). Elenilto
Minerals & Mining LLC (Elenilto), had participated in a bid for the
development of the Western Cluster iron ore deposits pursuant to a
tender floated by Government of Liberia (“GOL”). Elenilto was declared as
the winner and would need to carry out development of project as per the
provisions of a Mineral Development Agreement (“MDA”) executed with
the GOL. Now Elenilto along with Sesa Goa will develop the assets of
WLC which are as follows viz., 1) The Mano river (80 MT reserve base
with 51.4% Fe grade), 2) The Bomi Hills (50 MT reserve with 68% Fe
grade ) and 3) The Bea mountains (923 MT reserves with 37% Fe grade).
The company has indicated that of the total reserve base of ~1.0 billion
tonnes the saleable product would be ~330 million tonnes. Currently
acquisition of the 51% majority stake is subject to ratification of the MDA
by Legislature of Liberia. We believe this is positive move however we do
not see any immediate contribution coming in from these assets, we
maintain our target price of | 294/ share and upgrade our rating to BUY.
ƒ Fair Valuation
As per few media reports the cost of developing this mine will be
~$1.6 billion, which on an EV/tonne valuation (of saleable reserve)
will give us a price multiple of ~$4.8/tonne. We believe that the deal
is fairly valued as the management has indicated that the iron ore
grade would be higher one (63Fe content). Currently the project is
subject to ratification of Liberian government and after the approval
as per management guidance it will take two years for the company
to begin the first shipment. However, we are not factoring this in our
current estimates.
V a l u a t i o n
At the CMP of | 319, the stock is trading at 5.5x and 4.9x its FY12E and
FY13E EV/EBITDA, respectively. We believe this deal is positive for Sesa
and upgrade our rating to BUY, maintaining our target of |294
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