Sesa Goa - Liberian venture – a long- term value proposition ::Emkay

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Sesa Goa

Liberian venture – a long- term value proposition

ACCUMULATE

CMP: Rs241                                        Target Price: Rs308

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n     Sesa Goa to acquire 51% stake in Western Cluster Limited (WCL), from Elenilto Minerals & Mining LLC for a cash consideration of $90 million. WCL has access to 1 bn tonne iron ore (330 mn tonne saleable) resources in Liberia

n     Exploration to be carried out over next 6 months, railway lines of 140 km and port infrastructure to be refurbished. Commercial production likely at 5 mt in FY14, to be ramped upto 20-25 mtpa. Operating cost seen at ~US$30/ tonne

n     Currently Sesa has a total reserve base of 306 mt in India. With changing regulatory framework in India, this agreement gives Sesa an opportunity to leapfrog its business globally over the next couple of years.

n     We are not changing our estimates at this point; Retain the TP at Rs 308. Given the price erosion, we believe the stock discounts most of the concerns. Upgrade to Accumulate