Millennium Post

India’s ICVL to buy Rio Tinto coal assets in Mozambique

ICVL signed the pact on 28 July to buy Rio Tinto's 65 per cent stake in Benga and 100 per cent each in Zambeze and Tete East coal assets.

ICVL, a joint venture of Steel Authority of India, Coal India, Rashtriya Ispat Nigam, NTPC and NMDC, was created to ensure long-term security of supply of the critical raw material for the steel industry.

Benga, in which Tata Steel has the remaining 35 per cent stake, is the only mine operational while the remaining two are being developed. There is significant potential for tapping CBM from the acquired coal resources. Benga produces prime hard coking coal and thermal coal and the production of the operating coal mine can be expanded to 12 million tonnes per annum (mtpa) from 5 mtpa now, ICVL said in a statement.

The acquisition will help ICVL, which enjoys autonomy accorded to 'Navratna' firms without having the formal status, to achieve its 2019-20 target of owning 500 MT coking coal reserves. ‘The coal resource will become a long-term captive source of a critical raw material in steel making in geographical proximity to India. The coal mine and assets are located in the prime coking coal bearing region of the Moatize Coal Basin which is stated to be the second largest coal basin in world after the Bowen Basin in Australia,’ ICVL said.

The Mozambique acquisition is a significant and historic development towards assuring long-term coking coal security as Indian steel companies need higher input of raw material to fuel their growth, ICVL Chairman C S Verma said.

‘This acquisition gives the steel companies under the Ministry of Steel a strong foothold in this sought after coal basin,’ he added.

Rio Tinto, in a statement said, the sale is subject to certain conditions precedent and regulatory approvals. The transaction is expected to close in the third quarter of 2014. During the transition to the new owner, Rio Tinto will continue to manage the mine to the highest safety and environmental standards. Rio Tinto's other assets in the country are unaffected by this transaction, it said.

Rio Tinto had bought these assets through acquisition of Riversdale Mining Limited in 2011 for $4 billion. However, in 2013, it wrote off $3.5 billion of the purchase price which was partly instrumental for then chief executive Tom Alabanese to ‘step down’.

SAIL and RINL are both increasing their capacity to 23 mtpa and 6.3 mtpa respectively. Their requirement of coking coal would increase to a level of about 25 MT by 2015. NMDC is also in the process of setting up a 3 mtpa capacity integrated steel plant at Nagarnar in Chhattisgarh.
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