Mumbai: Varun Energy Corporation, a unit of Mumbai-based steelware exporter Varun Industries Ltd, has signed an agreement with the Department of Atomic Energy to sell the entire mineral concentrate that will be mined from its plant in the island African nation of Madagascar.
The company had announced earlier this month that it had discovered heavy mineral sand in Madagascar, estimated at about 266.8 million tons.
It plans to invest up to Rs300 crore over the next six to eight months in setting up a concentrating plant in Madagascar, with an initial capacity of 500,000 tonnes per annum, to sift heavy minerals from mined raw sand.
Kiran Mehta, chairman and managing director of Varun Industries, said the company will fund this investment by selling a 15-20% stake in wholly-owned subsidiary Varun Energy Corporation.
“We’re already in talks and institutional investors, both domestic and overseas have shown interest in picking up a stake. We should be able to finalize this in the next couple of months,” Mehta told Mint.
He said that cash flows from the sale of these heavy mineral sands would begin to flow into the company’s books in the next eight months.
Investors cheered the announcement, sending the stock to a lifetime high of Rs271.25 in intraday trade on Friday. The company’s shares closed 6.8% higher at Rs262.45. The Bombay Stock Exchange benchmark Sensex closed 1.6% higher the same day.
The company said that it carried out mineralogical analysis on samples from the mines with Indian Rare Earth Ltd, another state-run organization under the Department of Atomic Energy.
The report revealed that the heavy mineral sand contains ilmenite, monazite, rutile and leucoxene, zircon, garnet, sillimanite and other heavy minerals the company said in a statement.
These elements have uses in precision-guided weapons, lasers, radar, hybrid cars, magnets for electric vehicle motors, wind turbines, compact fluorescent light bulbs, flat panel displays and in medical diagnostics, pharmaceuticals, paints, ceramics and abrasives.
The company’s vice president for exploration, A. P. Dhurandhar, said that the company would initially focus on selling the concentrated heavy minerals and create value for the company.
“After about three to four years, we’ll review the scenario and may decide on building processing plants for titanium and monazite, which could require heavy investments of a billion dollars each,” he said.