Electrosteel Castings-Mineral Wealth

Calcutta based Electrosteel has become a play on three minerals :Coal, Iron Ore and Manganese and Pure Infrastructure play by virtue of its Expansions into Steel, Power Generation and Water Transport.

 

The bigger global miner BHP Billiton has forecast the commencement of a Super-Cycle in Coal and Iron-a key beneficiary in India would be the Rs 1200 crore Ductile Iron Pipe manufacturer Electrosteel Castings.

 

While the Corporate fetches a market cap of Rs 1600 crore at present, the Non Coking Coal and Iron Ore Reserves under its belt are worth Rs 108,000 crore.

 

Discount these Reserves by what-ever measure and we are talking of a phenomenal change in scale and valuations for Electrosteel Castings.

 

I.Electrosteel Castings-Backward Integration

 

A.Coking Coal Blocks Parbatpur, Bokaro (Jharkhand)

 

-Work on under ground mines started, production to commence by mid FY08.

-Certified Reserves-225 million tonnes

-Valued at Rs Rs 87750 crore

 (at current price of $ 100 per tonne and conversion rate of $ 39 per US dollar)

-Estimated Life: 100 years (will change with recovery and annual drawals).

-Capital Cost : Rs 350 crore

-State Royalty: Rs 25 per tonne

-Extraction Costs: $ 28 per tonne or approximately Rs 1100 per tonne

-Normalised RNOA: 48 per cent

 

 

B.Iron Ore Block, Kodilabad (Jharkhand)

 

-Open Cast mines, Work Commenced

-Estimated Iron Ores Reseves (FE>65) 100 Million Tonnes

-Valued at Rs 20000 crore

(100 MT @ $ 50 per tonne and Conversion at Rs 39 to a US Dollar)

-Capital Cost Rs 150 crore

-Production Commences by early FY09

-Estimated Mine Life 60 years (Will change with recovery & annual drawals)

 

Production of Coking Coal and Iron Ore from dedicated mines will bring operational economies to Electrosteel Castings leading to a sharp rise in profits by FY09.

 

II.Electrosteel Integrated

 

A 60:40 SPV set up Electrosteel Castings with an Investment of Rs 5 bn will be setting up a 1.2 million tpa Integrated Steel Plant and a 1200 MW Thermal Plant by FY 2010, costing about Rs 10,000 crore.

 

Dedicated Thermal Coking Coal mines at North Dhadhu with estimated high grade Coal Reserves of 190 Million tonnes have not been considered in the above forecasts but form a part of the $ 2.5 bn expansion cost

 

 

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