Duke
12th June 2009, 05:38 PM
Key Takeaways
>> Sesa Goa has acquired V.S Dempo & Co P LTD, which in turn holds 100% stake in Dempo Mining Corporation. Basically Sesa has acquired all the Goa mines of Dempo Group
>> Total consideration for the deal is Rs17.5bn (USD386mn). Its debt-free and cash-free acquisition. The deal will be funded through existing cash balance of Sesa, which is around Rs41.4bn
>> For FY09, Dempo achieved turnover of Rs9.76bn and EBITDA of Rs4.17bn. This includes forex loss of Rs1.6bn. So adjusted EBITDA stood at Rs5.7bn
>> The current cost of production of Dempo is around USD20/t (after adjusting for forex loss of USD7.5/t)
>> As per Sesa, there is good potential to reduce cost of production and ramp up the mining output of Dempo
>> Dempo has 1 (100% owned transshipper) and 1 (50% owned transshipper). The capacity of 100% owned shipper is around 2-2.5mt and is currently operating at 1-1.5mt. The capacity of 50% owned shipper is around 5mt
>> The capacity of processing plant at the mines is around 6mt
>> In FY09, Dempo’s total sales volumes comprised of 92% fines and 8% lumps. Majority of the ore sold is of 58-61% Fe content.
>> Dempo has a contract to sell 1mt of iron ore to Nippon Steel and balance quantity is sold in China. Dempo sales 60% of the ore on spot basis
>> The deal will provide the necessary infrastructure support, which was lacking by Sesa Goa. So the deal seems to be strategically fit for Sesa Goa
>> Sesa has set target to produce around 50mt of iron ore in next 3 years, which will be through organic and inorganic growth
>> The deal is EPS accretive for Sesa Goa. Considering the cost of production of USD20/t and average realization of USD45/t, it can generate an EPS of around Rs5-6/share of Sesa Goa (assuming volume of 5mt for Dempo)
>> Sesa Goa has acquired V.S Dempo & Co P LTD, which in turn holds 100% stake in Dempo Mining Corporation. Basically Sesa has acquired all the Goa mines of Dempo Group
>> Total consideration for the deal is Rs17.5bn (USD386mn). Its debt-free and cash-free acquisition. The deal will be funded through existing cash balance of Sesa, which is around Rs41.4bn
>> For FY09, Dempo achieved turnover of Rs9.76bn and EBITDA of Rs4.17bn. This includes forex loss of Rs1.6bn. So adjusted EBITDA stood at Rs5.7bn
>> The current cost of production of Dempo is around USD20/t (after adjusting for forex loss of USD7.5/t)
>> As per Sesa, there is good potential to reduce cost of production and ramp up the mining output of Dempo
>> Dempo has 1 (100% owned transshipper) and 1 (50% owned transshipper). The capacity of 100% owned shipper is around 2-2.5mt and is currently operating at 1-1.5mt. The capacity of 50% owned shipper is around 5mt
>> The capacity of processing plant at the mines is around 6mt
>> In FY09, Dempo’s total sales volumes comprised of 92% fines and 8% lumps. Majority of the ore sold is of 58-61% Fe content.
>> Dempo has a contract to sell 1mt of iron ore to Nippon Steel and balance quantity is sold in China. Dempo sales 60% of the ore on spot basis
>> The deal will provide the necessary infrastructure support, which was lacking by Sesa Goa. So the deal seems to be strategically fit for Sesa Goa
>> Sesa has set target to produce around 50mt of iron ore in next 3 years, which will be through organic and inorganic growth
>> The deal is EPS accretive for Sesa Goa. Considering the cost of production of USD20/t and average realization of USD45/t, it can generate an EPS of around Rs5-6/share of Sesa Goa (assuming volume of 5mt for Dempo)