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Don't know if this should be in Development or World news, mods can move as you see fit.
Indian firms will jointly bid for Afghanistan’s Hajigak iron
ore mines and a 24% stake in MEC Coal in Singapore
State-owned steel maker Steel Authority of India Ltd (SAIL) hopes to buy
iron ore mines in Afghanistan and is also eyeing a 24% stake in Singapore’s
MEC Coal via separate consortia, as the race for overseas mining assets
hots up.
“Only five-six big companies, headed by SAIL, will bid for Afghanistan’s
iron ore asset,” SAIL chairman C.S. Verma said in an interview. “In next
two weeks’ time, we should sign an agreement.”
Afghanistan has invited global bids for its Hajigak iron ore mineral fields
and short-listed 21 companies.
Verma, who convened a meeting of 15 Indian companies last week, said
that if the Indian consortium wins the Hajigak mines, it would be
interested in setting up a steel plant as the country is seen as a good
market.
Afghanistan currently imports 4-5 million tonnes (mt) of steel a year.
Mint reported on 20 May that representatives of the 15 companies
including Tata Steel Ltd, Rashtriya Ispat Nigam Ltd, Jindal Steel and Power
Ltd (JSPL) and Jindal Steel Works met SAIL executives to discuss a
joint bid for the fields, which may hold as much as 1.8 billion tonnes of
high-grade iron ore.
“Afghanistan’s economy is transforming into a developing one,” Verma
said. “Our bid is on a pure commercial bidding basis only, but yes, we have
to get support of the government, which I think will come.”
Verma also said the International Coal Ventures Pvt. Ltd (ICVL)
consortium, headed by SAIL, was in talks with Singapore-based MEC Coal
for the purchase of a 24% stake that could give the consortium some
thermal coal from overseas.
“ICVL and MEC are still discussing the documentation part of it,” he said.
“Stake buying is frozen now, but there are various other documents which
are required to be frozen, which we are discussing with them. There is no
timeline (for closure of the deal).”
Indian metal companies have been buying mines and plants overseas in an
effort to secure supplies otherwise unavailable in India and also to side
step as they are finding it difficult to grow in India owing to social,
environmental and regulatory roadblocks.
The trend that has accelerated recently started several years ago with
Tata Steel buying out Anglo Dutch Corus in 2006 and JSW Steel Ltd
acquiring a factory in the US in 2007 and later mines in Chile, the US and
Mozambique.
Even mid-size Essar Steel Ltd and JSPL have a global presence.
SAIL has been comparatively slow.
It has been chasing assets through ICVL, which is also headed by Verma,
but has met with no major success in the last two years.
Analysts say slow decision-making coupled with the difficulties of working
in foreign terrain are responsible for this.
Verma said such acquisitions are “not very easy”.
“Two or three other proposals (apart from MEC) are at various levels of
due diligence,” he said. “We are buying assets which we have to develop
and we have to cater to mining operations. Assume a success rate on a
conservative basis of 25%.”
Verma added that these investments would cost between $500 million
(Rs.2,265 crore) and $1 billion.
Analysts say SAIL needs to grow aggressively, pointing to growing
demand—it is rising at double digit rates—lagging supply, and rising
imports.
Most of the company’s planned modernization and expansion of steel
capacity to 23.5 mt by 2013 from 13.8 mt now is at existing steel plants.
It should, the analysts add, be building new plants with newer technology
instead.
“The perception about SAIL (being slow) is partially correct; there have
been delays on their projects,” said Arun Kejriwal, director of equity
research firm KRIS.
SAIL has been in talks with South Korea’s Pohang Iron and Steel Co.
(Posco) for setting up a plant using Finex technology to produce high
grade steel since last year amid reports of differences over shareholding.
“There are so many issues involved. There are technological issues
involved. There are many other logistics and organizational issues
involved. A detailed project report (DPR) is under preparation. The
gestation is three years from the time DPR is accepted,” said Verma.
“As for the acceptance of DPR I am not giving any time line.”
Indian firms will jointly bid for Afghanistan’s Hajigak iron
ore mines and a 24% stake in MEC Coal in Singapore
State-owned steel maker Steel Authority of India Ltd (SAIL) hopes to buy
iron ore mines in Afghanistan and is also eyeing a 24% stake in Singapore’s
MEC Coal via separate consortia, as the race for overseas mining assets
hots up.
“Only five-six big companies, headed by SAIL, will bid for Afghanistan’s
iron ore asset,” SAIL chairman C.S. Verma said in an interview. “In next
two weeks’ time, we should sign an agreement.”
Afghanistan has invited global bids for its Hajigak iron ore mineral fields
and short-listed 21 companies.
Verma, who convened a meeting of 15 Indian companies last week, said
that if the Indian consortium wins the Hajigak mines, it would be
interested in setting up a steel plant as the country is seen as a good
market.
Afghanistan currently imports 4-5 million tonnes (mt) of steel a year.
Mint reported on 20 May that representatives of the 15 companies
including Tata Steel Ltd, Rashtriya Ispat Nigam Ltd, Jindal Steel and Power
Ltd (JSPL) and Jindal Steel Works met SAIL executives to discuss a
joint bid for the fields, which may hold as much as 1.8 billion tonnes of
high-grade iron ore.
“Afghanistan’s economy is transforming into a developing one,” Verma
said. “Our bid is on a pure commercial bidding basis only, but yes, we have
to get support of the government, which I think will come.”
Verma also said the International Coal Ventures Pvt. Ltd (ICVL)
consortium, headed by SAIL, was in talks with Singapore-based MEC Coal
for the purchase of a 24% stake that could give the consortium some
thermal coal from overseas.
“ICVL and MEC are still discussing the documentation part of it,” he said.
“Stake buying is frozen now, but there are various other documents which
are required to be frozen, which we are discussing with them. There is no
timeline (for closure of the deal).”
Indian metal companies have been buying mines and plants overseas in an
effort to secure supplies otherwise unavailable in India and also to side
step as they are finding it difficult to grow in India owing to social,
environmental and regulatory roadblocks.
The trend that has accelerated recently started several years ago with
Tata Steel buying out Anglo Dutch Corus in 2006 and JSW Steel Ltd
acquiring a factory in the US in 2007 and later mines in Chile, the US and
Mozambique.
Even mid-size Essar Steel Ltd and JSPL have a global presence.
SAIL has been comparatively slow.
It has been chasing assets through ICVL, which is also headed by Verma,
but has met with no major success in the last two years.
Analysts say slow decision-making coupled with the difficulties of working
in foreign terrain are responsible for this.
Verma said such acquisitions are “not very easy”.
“Two or three other proposals (apart from MEC) are at various levels of
due diligence,” he said. “We are buying assets which we have to develop
and we have to cater to mining operations. Assume a success rate on a
conservative basis of 25%.”
Verma added that these investments would cost between $500 million
(Rs.2,265 crore) and $1 billion.
Analysts say SAIL needs to grow aggressively, pointing to growing
demand—it is rising at double digit rates—lagging supply, and rising
imports.
Most of the company’s planned modernization and expansion of steel
capacity to 23.5 mt by 2013 from 13.8 mt now is at existing steel plants.
It should, the analysts add, be building new plants with newer technology
instead.
“The perception about SAIL (being slow) is partially correct; there have
been delays on their projects,” said Arun Kejriwal, director of equity
research firm KRIS.
SAIL has been in talks with South Korea’s Pohang Iron and Steel Co.
(Posco) for setting up a plant using Finex technology to produce high
grade steel since last year amid reports of differences over shareholding.
“There are so many issues involved. There are technological issues
involved. There are many other logistics and organizational issues
involved. A detailed project report (DPR) is under preparation. The
gestation is three years from the time DPR is accepted,” said Verma.
“As for the acceptance of DPR I am not giving any time line.”
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