DEALS INDIA: Hindustan Copper Eyes Afghan Deposits

Jun 07, 2011 (Dow Jones Commodities News via Comtex) -- With 20 applications for new mining leases within India stuck in bureaucratic delays, state-owned Hindustan Copper is eyeing mines abroad to drive its expansion.

It wants to begin with bidding for copper deposits in Afghanistan, the company's top executive said, and may team up with National Aluminium Co., with which it has an agreement to jointly scout for mining assets.

"We are trying to get the details of Afghanistan's copper deposits that will be put up for bidding," said Shakeel Ahmed, Hindustan Copper's executive chairman and managing director. "If they call for expressions of interest, we will definitely be interested in taking part. We have the skill in mining and Nalco is cash rich." 

There could be more companies that form a consortium, "depending on the need," he said. Hindustan Copper has cash reserves of INR4.5 billion.

Afghanistan has opened up its economy and wants overseas companies to mine its mineral resources, the country's Mining Minister Wahidullah Shahrani said during a visit to Delhi last year. The government is expected to float tenders for some mines, according to a Business Standard report.

Steel Authority of India Ltd. has already said it will lead a consortium of steel companies to bid for iron-ore deposits in Afghanistan's Hajigak area, though the war-ravaged country is still politically unstable.

Hindustan Copper has 20 leases for prospecting and mining in India. But these, Ahmed said, are expected to time and the company is looking at other options to increase its output. In 2008, Hindustan Copper shut its 31,000-ton smelter in the western state of Rajasthan as it turned economically unviable, and the company decided to focus on mining copper ore. The company produced about 3.6 million ton of copper ore in the 2010-2011 year which ended March 31.

It uses some of this ore as input in its 19,000-ton smelter in Jharkhand. Surplus ore is outsourced to Hindalco Industries and Sterlite Industries India, which convert it into copper for HCL to sell.

The company's copper mines are in Jharkhand, Rajasthan and Madhya Pradesh and the only way it can boost production is to make them more efficient. Hindusthan Copper hopes to improve production by 8%-10%.

The company's target is to increase its output to 35,000 tons of copper this financial year, up from 31,683 tons previously, and 3.7 million tons of copper ore.

Globally, demand for copper is expected to pick up in a few months when reconstruction begins in quake-hit Japan. That is expected to firm up prices in the second half of this year, Ahmed said.

"But the average price for this full year should not be more than $9,200 a ton from about $9,100 now," he said.

Demand for copper, a bellwether for the economy, is expected to grow at around 7% this fiscal year in the domestic market, a pace nearly unchanged from last year, Ahmed said.