It is learnt that the export tie-up will translate into revenue earnings of around Rs 200 crore annually. Sterlite is also negotiating with several other international copper companies for the export tie-up, company sources said.

The extraction of precious metals like gold and silver will require setting up of a refinery for which Sterlite, at this stage, does not have any plans.

Commercial production at Sterlite's 100,000-tonne smelter has begun from April this year. The company intends to expand capacity to 150,000 tonne within the next two years.

Union Miniere has proposed a similar tie-up with Indo Gulf Corporation, the fertiliser and copper maker from the Aditya Birla group. The company's 100,000 tonnes per annum smelter went on stream in May this fiscal.

The coppersmelter is currently operating at 60 per cent capacity utilisation and the company plans to operate at 100 per cent capacity utilisation within the next six months.

The copper division contributed 61 per cent, that is around Rs 850 crore, to Sterlite's turnover of Rs 1,402 crore in 1997-98. The company itself consumes around 15 per cent of its primary copper production in the manufacture of telecom cables.

On reaching a near full capacity utilisation of 100,000 tpa, the copper division should be able to achieve an operating margin of around 30 per cent.

Low international prices may, however, affect sales realisation though margins are unlikely to be adversely affected. This is because Sterlite's entire copper concentrate requirement is imported.

The prices of copper wires and rods are lower by around 5 per cent to 6 per cent than the landed cost of imports. The imposition of the additional customs duty of 4 per cent and the depreciating rupee have been a shot in the arm for primary coppermanufacturers like Indo Gulf and Sterlite as it has made imports dearer.

Sterlite has reported a 31 per cent jump in turnover and a 23 per cent rise in net profit for the financial year ended June 30, 1998. In the current fiscal, it has targeted a sales growth of around 35 per cent.

The per tonne operating cost of the copper smelter and refinery is among the lowest in the world, and the company estimates cash break-even for its copper business to be around 30 per cent.

Exports preferred

Both Sterlite and Indo Gulf are capable of setting up a refinery to extract the precious metals contained in anode slime that their smelters generate, the cost of which would only be around Rs 50 crore. Both companies appear to be in favour of exporting the slime for two important reasons: one, their proposed individual capacities are too small to justify such a refinery and two, they are being offered attractive prices by overseas players. Indo Gulf, in fact, is considering setting up of a refinery at a laterstage.