New Delhi: Sponge iron and steel maker Monnet Ispat and Energy Ltd is in talks to form a new consortium led by Steel Authority of India Ltd (SAIL) to bid for copper and gold reserves in Afghanistan after a group headed by the state-run steel maker won the rights to mine a major iron ore reserve in the country.
“Afghanistan is a good opportunity. It is at a nascent stage and we can enter it now,” Sandeep Jajodia, executive vice-chairman and managing director of Monnet Ispat, said in an interview. “We have got a big mining and geological department. All we need to do is attach some copper and gold-specific people to it.”
Jajodia said Monnet was still in an early stage of discussions and would take a call on joining the SAIL-led consortium in a few days.
Afghanistan has invited expressions of interest by 9 March for gold and copper deposits in four provinces spread across the country, after awarding iron ore blocks in November, three of which were won by a SAIL-led consortium in Hajigak in which Monnet Ispat was a partner along with five other Indian companies.
“Regarding Afghanistan as a country, we have already taken a decision. Now we have to decide if we want to enter copper and gold now or after a year,” Jajodia said.
Mint had reported on 3 February that SAIL has already held a round of discussions with Aditya Birla Group and Jindal Steel and Power Ltd (JSPL), and is expected to formalize the consortium soon.
“The government is very keen to build a mineral belt in Afghanistan. We have already won iron ore deposits, we could have a common infrastructure for others,” said a senior official in the mines ministry, who requested anonymity.
The other companies that are most likely to join the SAIL-led consortium are state-run firms Hindustan Copper Ltd and Mineral Exploration Corp. Ltd.
As Indian firms race overseas to secure mineral resources for future growth, the state-run and private companies’ partnership could set a new trend in overseas ventures, one that helps mitigate risks for all the companies.
“I won’t be surprised if there are more such consortiums going for coking coal assets in Africa or Australia,” said Bhavesh Chauhan, a senior analyst at Angel Broking Ltd.
A government company-led initiative is particularly helpful for a high-risk country like Afghanistan that has been battling insurgency for three decades and is just opening up.
An executive with a private firm, who didn’t want to be named, said state-run companies have the financial and diplomatic backing of the government, which private companies could draw on.
Funding quandary
The official in the mines ministry said funding support for the SAIL-led iron ore consortium has to be worked out, even as the group formalizes its pact in Afghanistan.
“There could be multilateral funding. There could be the Asian Development Bank,” the official said. “It is still on the drawing-board stage.”
For its part, the government is looking to offer credit, or it could even fund some of the expenses in Afghanistan on the infrastructure construction front, the official said.
As part of the proposal for Hajigak, SAIL would need to spend an estimated $10.8 billion (Rs 53,245 crore today) building a 6.12-million-tonne steel plant, an 800 megawatts power plant, and 200km each of rail, road and power transmission lines, according to SAIL.
“Initial spending on exploration for three years will be funded by the consortium partners, but the big expenses will kick in after that in the mine development and exploitation stage,” SAIL chairman C.S. Verma had said in an interview on 17 January.
SAIL has asked for a $7.8 billion loan from the government, but for its initial exploration work, the firm and its partners are ready with $75 million for the first phase that involves prospecting and geological exploration.
Being the lead partner, SAIL holds an equity stake of 20% in the Hajigak consortium, while NMDC Ltd and Rashtriya Ispat Nigam Ltd have 18% each.
Among the private companies, JSW Steel Ltd and JSPL hold 16% stake each, while JSW Ispat Steel Ltd and Monnet Ispat have 8% and 4%, respectively.
Several options are being considered for evacuating the mineral deposits from the landlocked country, including an infrastructure link to an Iranian port.
The provinces where the copper and gold deposits are located in Afghanistan are Badakhshan, Ghazni, Sar-I-Pul, Balkh and Herat.
ruchira.s@livemint.com