Hind Copper chases an Afghan El Dorado

Hindustan Copper has embarked on a gold quest in Afghanistan.

“We have, in consortium with SAIL, put in bids for all the four mines being offered by the Republic of Afghanistan. These are copper and gold mines,” Shakeel Ahmed, chairman-cum-managing director, Hindustan Copper, told DNA.

The mines are Badakhshan (gold), Zarkashan (copper and gold), Balkhab (copper) and Shaida (copper), selected by the Afghanistan government for having significant resource potential, existence of previous drill holes and sampling, and being drill ready.

All the four tenders were launched in December and closed in March.

“Expressions of interest have been submitted and non-disclosure agreements signed, followed by pre-qualification questionnaire. We expect the final bidding process to take place within the next three months,” said Ahmed.

Afghanistan is offering a host of incentives like low corporate tax rate of 20%, facility for unlimited tax losses carry-forward and capitalisation of pre-production expenses to lure investors to uncharted territories.

But isn’t security a concern for the bidders?

Ahmed said the mines are mostly in relatively secure places. “Afghanistan has raised an industrial security force (called the Mines Protection Unit) whose personnel are taking care of the assets. Also, the government has promised to create infrastructure connecting the mine sites within a few years.”

Meanwhile, Hindustan Copper has decided to go for external commercial borrowings of $250 million in tranches. “We plan to raise about Rs250 crore, or just $50 million, initially during the first quarter of 2012-13, the rest during the year. Our total fund requirement, however, remains at $750 million for meeting the balance capital expenditure,” said Ahmed.

The resort to ECBs comes as it is no longer issuing fresh shares, planned earlier along with 10% government’s disinvestment.

The company is investing about Rs4,500 crore in the next five years to boost its copper ore output capacity from the present 3.4 million tonne to 12 million tonne. It has already awarded development contracts for expansion of mines like Khetri, Surda, Malanjkhand and Chapri-Sideshwar and reopening of Kenadadih mines.

HCL on Thursday signed a memorandum of understanding with the government for its 2012-13 target of raising ore output by 16% over the 3.45 million tonne projected for 2011-12.

Ahmed described the target as a stiff challenge. “None of our new mines under development would come into production during the year. The extra 16% production can come only from planned higher production in our existing mines like Malanjkhand and Banwas,” he said.