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Sesa Liberia buy doubles reserves

Saturday, 22 December 2012 - 2:13am IST | Place: Mumbai | Agency: DNA
Sesa Goa, the iron ore mining arm of London-based Vedanta Resources, has acquired the remaining stake in Liberia-based Western Cluster (WCL) for $33.5 million (Rs185 crore).

Sesa Goa, the iron ore mining arm of London-based Vedanta Resources, has acquired the remaining stake in Liberia-based Western Cluster (WCL) for $33.5 million (Rs185 crore).

It had picked up a 51% stake in the company last year for $90 million (Rs411 crore).

“WCL is a logical and strategic fit with Sesa’s existing iron ore business and is expected to create significant long-term value for all stakeholders. At WCL, exploration activities are progressing well, with over 42,000 metres of drilling completed till November 30. The project is on track for first shipment in FY2014,” said a company statement.

Analysts said this was expected as holding complete stake is always better.

“This gives Sesa Goa, which had been struggling to maintain its volumes in the country, access to a huge resource, although it is still under developmental stage,” said an analyst with a domestic brokerage, who did not wish to be named.

In fact, it is a logical move by the company and shows that it is confident of the potential from the project.

The WCL project includes development of iron ore deposits, necessary transportation and shipping infrastructure for export of iron ore.

It has up to 1 billion tonne of iron ore reserves, of which 330 million tonne is recoverable, way above Sesa Goa’s own reserve in India of up to 300 million tonne.

“Sesa Goa was acquired by Vedanta in April 2007 for $981 million. With Sesa’s reserve of 207 million tonne, it translated to $9/tonne. Sesa later acquired Dempo, which had 70 million tonne reserves for $368 million, translating to just over $5/tonne. Both the assets were developed and at operational stage. But this one is still to be development and first batch of iron ore is still to come out,” said another analyst from a domestic brokerage.

According to the total price paid by Sesa, the acquisition is at $3 per tonne, but considering substantial capex required these figures can change. But analysts point out that this new project doubles the company’s reserve base and gives a positive outlook for future revenues.


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