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KOLKATA (miningweekly.com) - Concluding the final round of negotiations on the legal contract for the $11-billion development of the Hajigak iron-ore reserves in Afghanistan, the consortium led by Steel Authority of India Limited (SAIL) has sought the allocation of coking coal blocks as a precondition to constructing a steel mill linked to the ore reserves.
The consortium, dubbed Afghan Iron and Steel Company Limited (Afisco), proposed a six-million-ton-a-year steel plant in its bid for development of the Hajigak reserves along with supporting infrastructural facilities, but the bid for the reserves did not include coal linkages, which would be necessary to set up the steel production facility, an official in SAIL said.
The legal contract negotiated between Afisco and the Afghan Mines Ministry would now be forwarded for the approval of the government of Afghanistan before formal signing, the official said.
Afisco has earmarked an initial investment of $75-million for conducting preliminary exploratory work at Hajigak, which will be completed over two years.
The Indian consortium had also sought sovereign funding for the $11-billion Afghan project, which was under the consideration of the Mines and the External Affairs Ministries, but no decision had been taken at this stage, an official in the Mines Ministry said.
Significantly, the draft contract agreed between the developer and the Afghan Mines Ministry provided for a sliding royalty rate of between 3% and 12%, instead of the usual fixed rate, to be payable by Afisco.
A sliding rate based on benchmark international iron-ore prices was decided on to ensure a more equitable sharing of benefits between the Afghan government and Afisco during boom periods in international iron-ore markets, Ministry officials said.
However, a quick decision on allocation of a coal block for the proposed steel plant was crucial since any delays in setting up the steel mill would result in a cap on iron-ore exports by Afisco coming into play, the official said.
The Afghan government was, naturally, keen to maximise value addition of the extracted ore within the country, requiring the provision of a cap on exports being incorporated into the draft agreement, in case of delays in the construction of the steel mill.
Afisco, which includes SAIL and iron-ore miner NMDC Limited, in 2011 won the rights to develop the Hajigak reserves, committing an investment of $11-billion for development and extraction of iron-ore reserves, a steel production mill and associated logistics infrastructure.
SAIL had the highest stake in the consortium, at 20%, while NMDC and steel producer Rashtriya Ispat Nigam Limited held 18% each. Private consortium members JSW Steel and Jindal Steel and Power Limited also held 16% each, while JSW Ispat and Monnet Ispat and Energy Limited had 8% and 4% respectively.
The consortium, dubbed Afghan Iron and Steel Company Limited (Afisco), proposed a six-million-ton-a-year steel plant in its bid for development of the Hajigak reserves along with supporting infrastructural facilities, but the bid for the reserves did not include coal linkages, which would be necessary to set up the steel production facility, an official in SAIL said.
The legal contract negotiated between Afisco and the Afghan Mines Ministry would now be forwarded for the approval of the government of Afghanistan before formal signing, the official said.
Afisco has earmarked an initial investment of $75-million for conducting preliminary exploratory work at Hajigak, which will be completed over two years.
The Indian consortium had also sought sovereign funding for the $11-billion Afghan project, which was under the consideration of the Mines and the External Affairs Ministries, but no decision had been taken at this stage, an official in the Mines Ministry said.
Significantly, the draft contract agreed between the developer and the Afghan Mines Ministry provided for a sliding royalty rate of between 3% and 12%, instead of the usual fixed rate, to be payable by Afisco.
A sliding rate based on benchmark international iron-ore prices was decided on to ensure a more equitable sharing of benefits between the Afghan government and Afisco during boom periods in international iron-ore markets, Ministry officials said.
However, a quick decision on allocation of a coal block for the proposed steel plant was crucial since any delays in setting up the steel mill would result in a cap on iron-ore exports by Afisco coming into play, the official said.
The Afghan government was, naturally, keen to maximise value addition of the extracted ore within the country, requiring the provision of a cap on exports being incorporated into the draft agreement, in case of delays in the construction of the steel mill.
Afisco, which includes SAIL and iron-ore miner NMDC Limited, in 2011 won the rights to develop the Hajigak reserves, committing an investment of $11-billion for development and extraction of iron-ore reserves, a steel production mill and associated logistics infrastructure.
SAIL had the highest stake in the consortium, at 20%, while NMDC and steel producer Rashtriya Ispat Nigam Limited held 18% each. Private consortium members JSW Steel and Jindal Steel and Power Limited also held 16% each, while JSW Ispat and Monnet Ispat and Energy Limited had 8% and 4% respectively.
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