The acquisition of Goa-based Dempo Mining by Sesa Goa, a group company of metal giant Vedanta Resources, on a debt-free and cash-free basis of Rs 1,750 crore, is viewed by experts as a balanced deal in the current scenario. The deal, on a per tonne basis, is valued at about $5, less than the valuation of Sesa Goa, which is $11 per tonne. Also, for Sesa Goa, the acquisition comes with better infrastructure, jetties, transhippers and loading capacity at the Mormugoa port.
According to industry experts, there are not many players in mining who could clinch the Rs 1,750 crore deal. The large players include Sesa Goa, Aditya Birla Group’s Essel Mining and Industries Ltd and Runta Mining, among others. However, it made sense for Sesa Goa as the company has huge surplus cash of about Rs 4,143 crore, which it wanted to deploy. Further, Dempo is a well-known exporter of iron ore to China, where Sesa Goa has a significant presence. Sesa Goa exports about more than 60% of its iron ore production to China. Nippon steel, the world’s second largest steel player, is one of Dempo’s prized customers which will be an added advantage for the company.
Dempo Mining has 60% reserves and 40% resources. It has also signed an MoU for mining with the Jharkhand government. Going ahead, Sesa Goa sees huge cost optimising opportunity at Dempo, it said in an investor conference on Friday. Sesa Goa’s stocks on Friday touched a high of Rs 215, up 12% from its previous close, a day after the announcement of the deal. The scrip finally closed at Rs 203, up 5.62% on the BSE.