Hindustan Copper Ltd’s board of directors will take up the issue of raising Rs 250 crore through ECB shortly. The management of the public sector miner needs to bridge a gap in financing its ongoing mine expansion plans in three States.
“Though we need the money next year, the currency and interest arbitrages, available now, has thrown up an opportunity for raising funds through ECB at record low cost,” Mr Shakeel Ahmed, CMD, told Business Line .
According to HCL estimates, it does not need to go in for currency hedge because of a “natural and in-built hedge in revenue realisation”.
Mr Ahmed said HCL’s product — copper — has a LME price reference in dollar terms, but it is realised in rupee terms. “So the mechanism makes the revenue neutral to currency fluctuations,” he explained.
As a result, HCL can mop up the required funds at LIBOR plus 1.5 per cent and interest rate hedge at around 4.5 per cent. “This will give us a five per cent cost arbitrage over borrowing in India,” he added.
HCL last year had dropped the proposal for a follow-on equity offer to raise funds and instead decided to opt for ECB, besides using internal cash flow and reserves.
Meanwhile, HCL has submitted environment impact study and underground mine plan to the Ministry of Environment and Forests for its biggest (5 million tonnes a year) project, an erstwhile open cast mine at Malanjkhand in Madhya Pradesh. It may get the final clearance in the next monthly meeting of the Ministry. It is estimated to have 141 million tonnes copper bearing ores and the targeted depth is 300 metres.
HCL has, however, stumbled on to unforeseen hurdles in three projects – two in Rajasthan and one in Jharkhand. “For the proposed 75 km Baniwali ki Dhani project, we have decided to move the Supreme Court (environment bench) in July through an interlocutory application seeking exemption from a mining ban in the Aravalli region,” HCL CMD said.