On the problems that affected Hindustan Copper

A number of factors have hit the company hard, the most crucial being the drop in LME prices. Being a primary copper producing company we are intimately linked to the LME prices. Other problems of the company include the disadvantages of low copper content in its ores along with low amounts of gold and silver present in the ores. Moreover,uneconomic mining costs which are much higher than international standards is another problem. The main disadvantage of Indian copper mines is that almost 50 per cent of them belong to the underground category which yield low productivity standards.

On your efforts to turnaround the fortunes

The company is taking concerted efforts to achieve a reversal of fortunes. This would be through a financial restructuring process and by going through recommendations of European consultancy firm AT Kearney. Besides we are going in for a voluntary retirement scheme (VRS) this year too.

About the financial restructuring programme of the company

We have embarked on a financial restructuring plan where the company has received government guarantee for raising its borrowing capacity for expansion programmes. We were also granted permission by the government to convert Rs 183 crore loans into preference shares at an interest of 7.5 per cent. The government has also agreed to write off loans worth Rs 165crore.

About the basic recommendations of the consultant firm

European consulting firm AT Kerney has chartered out a prescription policy for Hindustan Copper to help it tide over the present problems by identifying certain core areas to help the company to achieve a turnaround in the next few years.

The consultant in its principal recommendations has identified certain areas of strength and weaknesses for the company. The areas of strength include smelting and refining activities, whereas the weak areas include the phasing out of operations of the uneconomic mines.

On the closure of the company's mines

Currently, the company has six underground mines and one opencast mine. We have closed down Mosabani mines since the last one year and have also suspended mining operations at two other mines in the Ghatsila area from the first week of July this year. There is no chance of reviving the mines of Kendadih and Pathargoda which have become really unviable.

On the proposal to increasesmelting capacities of the company

It was suggested by AT Kearney that Hindustan Copper should raise its smelting activities at its Khetri smelter in Rajasthan from 31,000 tonne to 45,000 tonne, which would require an investment of Rs 50 crore. In fact, we have appointed a leading Finish technologist-Ootokompu Engineering Contractors-to help increase capacity of Khetri smelter. This would essentially mean bottlenecking rather than a conventional expansion. For the Ghatsila smelter, capacity would be raised from 16,500 tonne to 25,000 tonne which could again involve an investment of about Rs 25 crore.

On the company's voluntary retirement scheme (VRS)

The company expects almost 2,000 workers to opt for VRS in this fiscal, and an allocation of Rs 100 crore from the government. Last year, we had received Rs 60 crore for almost 1,200 people. An ideal workforce could be to the tune of 10,000. But offering VRS after all involves not only a revenue outgo but also a social cost, which takes time.Moreover, the entire exercise of this separation scheme is also linked to the LME prices.

On the import of concentrates as a solution to tide over uneconomic costs

The import of concentrates would be a definite solution to tide over the uneconomic costs. We have contracted about 30,000 tonne of copper concentrate to supplement to our primary copper shortage. We plan to import an additional 20,000 tonne in the current year as well. In fact, out of the 30,000 contracted quantity, 20,000 tonne had been recently received by the company. It is prudent to go in for imported concentrates in the wake of the falling copper prices on LME, as it helps the company to get insulated from the values of the exchange.

On the import of copper cathodes

The import of copper concentrates is more economic than the import of copper cathodes. Earlier the company was importing cathodes, but has discontinued it since. In the last budget, the 5 per cent duty differential between cathode and CC rodes were removedand hence there was no factor of any gain whatsoever by importing the same.

Conversion costs are also high in the case of copper cathodes than imported copper. While copper cathodes can be converted at only continuous caster plants, imported concentrates can be converted at any of the company's smelters. Moreover, margins and manpower utility are definitely higher in the case of copper concentrates.

On the company's plans to break even

The LME price which was $2,844 per tonne in 1995-96 plumetted to $1,580 a tonne in 1998-99. The four month average at present is $1,466. With all mines running at capacity, only an LME price of $2,500 would help a break even.

On Hind Copper's plans for diversification

Hindustan Copper is taking a look into certain diversified areas which has synergistic linkages with the main areas of operation. Oxygen-free high conductivity copper with special applications is one area. We are also studying a possibility for manufacture of wire bars with inferior feedmaterial which would be priced much low than the regular bars.