NEW DELHI - India's Sterlite Industries will pay $1.7 billion in cash and notes to buy bankrupt U.S. copper miner Asarco LLC, lower than the $2.6 billion it offered last year, the Indian firm said on Saturday.

Sterlite, a unit of London-listed Vedanta Resources, said in a statement it had agreed with Asarco to pay $1.1 billion in cash, and $600 million in senior secured non-interest bearing promissory notes, to be paid over a period of nine years, for substantially all the operating assets of the U.S. firm.

Sterlite and Asarco's parent Grupo Mexico have been in talks over the deal for months. Last October, Sterlite backed out of a $2.6-billion deal to buy the company, saying it would need a substantial reduction in price after a drop in the copper markets.

We are happy that we have reached agreement with ASARCO on these new terms, Sterlite Chairman Anil Agarwal said in a statement.

This acquisition is in line with our strategy of leveraging our existing skills to become a diversified global copper producer and creating long-term value for shareholders.

Sterlite said, that of the $600 million payment in notes, it would have to pay $20 million each year from the end of the second year for a period of seven years and make a terminal payment of $460 million at the end of the ninth year.

If the annual average of daily copper prices in a particular year increased beyond $6,000 per tonne, the annual payment that year would be increased to a maximum of $66.67 million, but the total payment in notes remains unchanged at $600 million, Sterlite said.

The deal looks to be valued quite fairly, said Shraddha Shroff, a metals analyst with Mumbai brokerage K.R. Choksey. We expect the commodity cycle to start reversing in six to eight months and Sterlite will be well placed now to reap the benefit.

Prices of copper, which is used in power and construction, have fallen about 60 percent since a record $8,940 in July 2008. On the London Metal Exchange, copper for three month delivery ended at $3,723 a tonnes on Friday.

A Reuters poll of commodity analysts in January showed prices of copper were expected to average $3,417 a tonne this year, against an average price of $6,959 in 2008..

Asarco, which owns three copper mines in Arizona, sold 237,000 tonnes of refined copper in 2008 and its mines have reserves of 5 million tonnes of contained copper, Sterlite said.

A deal with Sterlite would allow Asarco to exit bankruptcy after seeking court protection from creditors amid a slew of environmental lawsuits in 2005.

What we need to watch out for is how much funds they (Sterlite) need to put in to revive Asarco, Shroff said.

RBS Securities was the financial adviser for Sterlite, while Asarco was advised by Barclays Capital, the Indian firm said.

(Additional reporting by Prashant Mehra in MUMBAI)