Company has a presence across the entire copper value chain
Hindustan Copper Ltd is awaiting the go-ahead to hit the capital market after the cabinet recently approved a proposal to dilute 9.59% government stake in the mining company. The company is already listed on the stock exchanges.
Once a sick CPSU, HCL has moved into the profit zone in the last three years, and is debt-free now. To maintain its growth drive, HCL has drawn up ambitious capacity expansion plans. It plans to almost treble its copper mining capacity to 12.4 million tonne (mt) by 2017 from the existing 3.4 mt a year.
HCL is the only company to have a presence across the entire copper value chain?from copper ore mining to smelting to production of copper cathode and wire-rod. This is the PSU’s main strength given that the international copper concentrate market is prone to volatility.
Power and real estate sectors are the key consumers of copper and both the sectors are expected to grow fast with the economy. For example, the government has envisaged 88,000 MW capacity addition in power generation during the current 12th Five-year Plan. That will necessitate matching investment in power transmission and distribution. Similarly, the demand for housing in urban areas are expected to rise as people migrate from rural areas into cities for jobs. That is the reason while the global demand for copper is growing at 2% annually, India’s requirement of the non-ferrous metal is growing at 8-9%.
Currently, HCL?s focus is on manufacturing refined copper products. But the company expects that in coming years, copper concentrates, rather than refined copper products, will be its primary items.
Leveraging the integrated nature of its business, the company has kept its cost of production low, which helps it realise comparatively better margins on sales. Copper mining has a relatively high barrier to entry, requiring substantial capital expenditure and time–from the initial reconnaissance of an area to the actual production of copper ore. HCL has set up mining complexes in three major copper ore deposit areas in the country.
Unlike overseas suppliers who are hamstrung by constraints of international logistics, HCL can quickly deliver copper concentrates to domestic refiners and save on customs duty, freight and insurance.
Having own mine and production facilities shield the company from international price volatility in copper concentrate. This also gives HCL the flexibility to either use its copper concentrate to produce refined copper, or sell to other refined copper producers in India, depending on profitability and other business considerations.
