After the acquisition, the mines will operate under a subsidiary of Sterlite in Australia. The appropriate valuation for the mines is not yet known. The company has appointed Ernst & Young to gauge the value of the deal.The acquisition will be made through internal accruals and no additional funds will be raised for this purpose, sources said.

The mines are expected to fulfill 50 per cent of the company's requirement of copper concentrates. The move is fundamentally to assure the supply of raw materials to its smelters in India. With the captive mines under Sterlite's fold, the company would be ensured of a steady supply of concentrates at competitive rates. The acquisition is likely to bring down the variable cost per tonne by 10 to 15 per cent.

The company is likely to source the remaining 50 per cent of its requirements through long term contracts. Sterlite hopes to import over 60,000 tonnes of copper concentrates for its smelter from the Australian mines. The copper content of the concentrates which will be sourced from the mines is said to be in a range of 28 to 30 per cent.

The long drawn decline in copper prices had earlier put pressure on copper mines, some of which had closed down due to heavy cash losses. This led to a deficit in the availability of concentrates fuelling a substantial drop in the treatment/refining charges (TC/RC) revenue of smelters. TC/RC which bears a high correlation to copper prices had earlier declined to US $0.13 per pound.

The company also plans to spend at least Rs 90 crore on its debottle-necking operations which will increase its smelter capacity by another 30,000 tonne. At present, the company has a smelter capacity of 1,20,000 tonnes. Debottle-necking is expected to be completed by the second quarter of the calender year 2001.