Currently, Anode Slime is exported as there is no domestic market for the product. To extract precious metals like gold and silver, the company is investing in a copper recovery plant which will be operational only after eight months from now. The company, however, has refused to comment on the cost of the plant. Even if copper prices are not able to yield substantial revenue due to over capacity and lack of demand in the West, the precious metal plant can be a saviour in commodities business. At acapacity of 1 lakh tonnes, Anode Slime will yield three tonnes of gold and 30 tonnes of silver. These precious metals are estimated to generate Rs 150 crore at the current prices - Rs 30 crore from silver and the balance from gold. Apart from this, phosphoric acid is also contributing to the revenue. Though this revenue was very low in 1998-99 at around Rs 4.44 crore, it will show a substantial increase for the current financial year.

However, Indo Gulf is suffering from high interest burden. Operating profit margin (PBDIT/sales) for 1998-99 was 22 per cent and gross profit margin (PBDT/sales) was 17.43 per cent. There are talks of selling off the jetty at Dahej. The company's state of the art Jetty has a capacity to handle ships with a water displacement capacity of 43,000 DWT. The company wants to hive off the jetty whose proceeds will be used to repay debts. If this deal is successful, the current debt portion of Rs 1,384 crore will come down to around Rs 1000 crore. This will bring down the debt equity to 0.7:1.

Further, the company can actually become a zero debt company in the coming future. Analysts are not ready to comment on the future earnings as copper prices are ever increasing. On a conservative basis, the demand from the West is expected to go up by 2.5 per cent. Western mine capacity growth is slowing but an SG quarterly review states that there will be an increase of 8 per cent between 1999 and 2001. The recent price surge (before the merger) has lifted a quarter of the industry from cash loss to profit.

For fiscal 1999, copper accounted for 53 per cent of total sales and analysts expect it will be around 70 per cent for the current fiscal. Total sales for IGCL for the current fiscal are projected at around Rs 1,800 crore. With copper prices increasing in the international markets, the company will gain from these rises. What makes the copper story interesting is the fact that a major merger in the international markets will allow prices to remain firm throughout the year 2000 The merger between Phelps Dodge and Cyprus Amax's could be the most needed tonic for copper which is emerging from its hibernation. As the three month copper prices have crossed $ 1,800 per tonne, this merger is expected to hike international prices still further. Another good reason for the prices to move up could be the fact that after the merger between Phelp Dodge and Cyprus Amax, Phelp Dodge is acquiring Asarco at $1.12 billion, thus making it the biggest copper company.

On the other hand, Birla Copper has increased prices of continuous cast rods by Rs 3,000 a tonne to Rs 1.2 lakh. Copper producers had already increased selling prices for both the products by Rs 6,000 a tonne in the second half of September due to the firm trend on LME. What has kept a fundamental stock like Indo Gulf from showing its true valuation is the fact that funds are booking profits at new highs. This has kept the price of Indo Gulf in the range of Rs 68-72 for a long time. But looking at the fundamentals, the scrip will show its true valuations in the very near future. Indo Gulf has a book value of Rs 62, an operating profit margin of 22 per cent and a return on capital employed of 11.49.