Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sesa Goa (SESA)
Metals & Mining
A long gestation investment. Sesa Goa has proposed to acquire 51% in Western
Cluster (WCL) iron ore project in Liberia of Elenilto Minerals & Mining LLC for cash
consideration of US$90 mn, subject to ratification of the same by the Liberian
Parliament. WCL has three deposits with cumulative resources in excess of 1 bn tonnes
and saleable ore of ~330 mn tonnes; large part of the R&R base is in low FE content
mines. On optimistic management assumptions of COP, project timelines and capex,
the deal can add to the fair value
Set to acquire 51% stake in WCL for US$90 mn post Liberia Legislature ratification
Sesa Goa has signed a definitive agreement with Elenilto Minerals & Mining LLC, a wholly owned
subsidiary of Elenilto, to acquire a majority 51% stake in iron ore mine viz Western Cluster Limited
(WCL) for a total consideration of US$90 mn. Key highlights of the investment
WCL has three deposits with R&R in excess of 1 bn tonnes—(1) Mano River Iron ore Deposits
with estimated reserves of 80 mt with 51.4% Fe grade, (2) Bomi Hills deposits with reserves of
about 50 mn tonnes at a cut-off grade of 68% Fe and (3) Bea Mountains project with resources
of about 923 mn tonnes at an average grade of 37% Fe.
Life of the mining lease is 25 years. Royalty rate is 4.5%. WCL will have to share 21% of profits
in the project after yield of 22.5% on capital invested. Income tax rate will likely be 30% or
lower.
Capex per tonne of iron ore capacity will likely be in the range of US$90-120/tonne. Based on a
capacity of 20 mn tonnes, total capex works out to US$1.8-2.4 bn. Capex will be broadly split
between port, rail and mining. Mines are between 70 and 140 kms away from the port. Sesa
will have access to land for railway corridor.
Sesa expects shipments to start in 2014. Initial capacity will be 5-8 mn tonnes which may be
increased subsequently. The management expects the cash cost of production to be
US$30/tonne FOB, which seems a little aggressive, in our view.
Too early to assign any value
The consideration paid for the stake implies an iron ore price of US$100/tonne on management
assumptions. Management estimates are, however, optimistic on timelines (2014) and cost
(US$30/tonne FOB). Noting the long gestation period, lack of specifics on actual reserves, capex
and cost, we refrain from assigning any value to this investment.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sesa Goa (SESA)
Metals & Mining
A long gestation investment. Sesa Goa has proposed to acquire 51% in Western
Cluster (WCL) iron ore project in Liberia of Elenilto Minerals & Mining LLC for cash
consideration of US$90 mn, subject to ratification of the same by the Liberian
Parliament. WCL has three deposits with cumulative resources in excess of 1 bn tonnes
and saleable ore of ~330 mn tonnes; large part of the R&R base is in low FE content
mines. On optimistic management assumptions of COP, project timelines and capex,
the deal can add to the fair value
Set to acquire 51% stake in WCL for US$90 mn post Liberia Legislature ratification
Sesa Goa has signed a definitive agreement with Elenilto Minerals & Mining LLC, a wholly owned
subsidiary of Elenilto, to acquire a majority 51% stake in iron ore mine viz Western Cluster Limited
(WCL) for a total consideration of US$90 mn. Key highlights of the investment
WCL has three deposits with R&R in excess of 1 bn tonnes—(1) Mano River Iron ore Deposits
with estimated reserves of 80 mt with 51.4% Fe grade, (2) Bomi Hills deposits with reserves of
about 50 mn tonnes at a cut-off grade of 68% Fe and (3) Bea Mountains project with resources
of about 923 mn tonnes at an average grade of 37% Fe.
Life of the mining lease is 25 years. Royalty rate is 4.5%. WCL will have to share 21% of profits
in the project after yield of 22.5% on capital invested. Income tax rate will likely be 30% or
lower.
Capex per tonne of iron ore capacity will likely be in the range of US$90-120/tonne. Based on a
capacity of 20 mn tonnes, total capex works out to US$1.8-2.4 bn. Capex will be broadly split
between port, rail and mining. Mines are between 70 and 140 kms away from the port. Sesa
will have access to land for railway corridor.
Sesa expects shipments to start in 2014. Initial capacity will be 5-8 mn tonnes which may be
increased subsequently. The management expects the cash cost of production to be
US$30/tonne FOB, which seems a little aggressive, in our view.
Too early to assign any value
The consideration paid for the stake implies an iron ore price of US$100/tonne on management
assumptions. Management estimates are, however, optimistic on timelines (2014) and cost
(US$30/tonne FOB). Noting the long gestation period, lack of specifics on actual reserves, capex
and cost, we refrain from assigning any value to this investment.
No comments:
Post a Comment