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Hindustan Copper, India's Government Plan Share Sale (Update3)
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Jan. 7 (Bloomberg) -- Hindustan Copper Ltd., India's largest state-owned producer, and the government plan to sell as much as 40 billion rupees ($873 million) of stock as part of a record sell-off of assets.

The government aims to offload 10 percent from its 99.59 percent holding by December, Chairman and Managing Director Shakeel Ahmed said in an interview. Hindustan Copper has sought federal approval to sell a similar stake, he said. The Kolkata- based company's shares jumped by its daily limit and ended up 10 percent.

India has 60 state-run companies including Steel Authority of India Ltd. and Bharat Sanchar Nigam Ltd. in which it can sell stakes to build roads, ports and utilities, the finance ministry said in November. The shares of Hindustan Copper, the sole owner of copper mines in India, almost tripled last year as demand revived for the metal used to make cars and electric wires.

"Metals are on fire so investors will be more than happy to buy the shares as very few are available now," said Sanjay Makhija, head of institutional sales at Fortune Financial Services India Ltd. in Mumbai. "Also, this is the only one that has mines, so it can always expand when it wants to."

The shares rose 10 percent to close at 316.3 rupees, the highest since Nov. 11. The benchmark Sensitive Index of the Bombay Stock Exchange fell 0.5 percent.


Hindustan Copper expects to turn profitable in the year ending March 31 as it expands concentrate production, Ahmed said. Net income will probably be at least 1 billion rupees, he said. The company posted a loss of 103 million rupees on sales of 13.5 billion rupees the previous year, according to its annual report.

Ahmed, who took charge on Oct. 28, aims to transform Hindustan Copper into mainly a mining company by winding down its smelting business and increasing capacity at its quarries. Rising sales of vehicles and government spending on electricity networks are spurring copper demand in India, the world's second-fastest growing major economy.

"The strategy to focus only on mining looks good in the short term," said Alex Mathews, research head at Geojit BNP Paribas Financial Services Ltd. in Mumbai. "There may, however, be scope for smelting capacities to increase in the coming years as India's copper demand is likely to grow by double digits."

The nation's copper consumption is expected to rise more than 6.5 percent to about 590,000 metric tons this year, Ahmed said yesterday. Copper prices yesterday jumped to the highest level in more than 16 months in London, New York and Shanghai on speculation that a global economic recovery from the worst recession since World War II will spur demand.

Copper concentrate is smelted in a furnace to produce purified copper.

'Firm Prices'

"Prices should remain firm as demand has started picking up from the automobile and power industries," Ahmed said.

Hindustan Copper owns reserves in the northwestern state of Rajasthan, the central state of Madhya Pradesh and in the eastern state of Jharkhand. Rival Vedanta Resources Plc operates copper mines in Australia and Zambia, while second-ranked Hindalco Industries Ltd. owns a mine in Australia.

Hindustan Copper plans to almost quadruple copper- concentrate production to 11.4 million tons annually in five to seven years, Ahmed said. The company closed its smelting unit at Khetri in Rajasthan in December 2008, shuttering two-thirds of its 48,000-ton smelting capacity.

"Social responsibility" is preventing the company from closing its remaining smelting unit in Jharkhand, Ahmed said.

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