New Delhi: State-run International Coal Ventures Pvt. Ltd (ICVL) is evaluating six opportunities valued at a minimum $1.2 billion for acquiring stakes in coal mining projects owned by companies such as Australia’s Aquila Resources Ltd and Stanmore Coal Ltd, and Alpha Natural Resources Inc. of the US.
The other options include acquiring a 24% stake in Singapore-based MEC Coal, a 59% stake in Minas de Revuboè owned by Australia’s Talbot Group in Mozambique, and a coal mine project in South Africa.
To be sure, while private Indian firms have been successful in securing coal resources from foreign companies, ICVL, which has gone up against Chinese coal miners such as China Shenhua Energy Co. Ltd and Yanzhou Coal Mining Co. Ltd, has been unable to secure even a single property.
ICVL was set up by five state-owned firms—NTPC Ltd, Steel Authority of India Ltd (SAIL), Coal India Ltd, Rashtriya Ispat Nigam Ltd and NMDC Ltd—to secure overseas coal assets two years ago.
“The opportunities are being evaluated and the due diligence is on. Each of the six opportunities is valued between $200 million and $600 million,” said a senior ICVL executive, who did not want to be identified.
“We are also interested in Washpool Coal Pty Ltd’s coal project, which is a subsidiary of Aquila Resources. Most of these projects, except MEC Coal’s project in Indonesia, are of coking coal. The Mozambique bid is expected to be submitted shortly,” he added.
While C.S. Verma, SAIL chairman and head of ICVL, declined to name the specific opportunities, he confirmed that ICVL is carrying out due diligence on four-five assets. “I am bound by non-disclosure agreements agreements,” Verma said.
Questions emailed to Aquila Resources, Stanmore Coal, Alpha Natural Resources, and Ajay Kumar Mathur, executive director and chief operating officer of ICVL, remained unanswered at the time of going to press.
Mint had reported on ICVL’s plans to bid for stakes in the Revuboè coal mining project in Mozambique and in MEC Coal on 6 June and 8 July, respectively.
Analysts say bids by Indian miners tend to be relatively uncompetitive.
“Pricing and price sensitivity of the final outputs in India may present a constraint on how much Indian companies are willing to put on the table. In case of metallurgical coal assets, where the market in India is aligned globally, the Indian companies may compete well with global majors,” Dipesh Dipu, director of consulting, energy and resources, and mining, at Deloitte Touche Tohmatsu India Pvt. Ltd.
India does not have substantial good-quality metallurgical coal reserves. Demand for the fuel in 2009-10 was 40 million tonnes (mt), of which 23 mt was imported. Demand is expected to rise to nearly 90 mt by 2020. There has been a growing demand for metallurgical coal due to the growth expected in the steel sector. Australia, emerging as a major source of India’s mineral imports, is the largest exporter of metallurgical coal in the world.
Verma defended ICVL’s track record and said, “ICVL had bid for around 8-10 assets last year and we will be bidding for more properties this year. Acquiring coal mines in such a competitive environment is not an easy task.”
According to Dipu, a prerequisite for winning a bid for global assets is an understanding of geotechnical features and supply chain issues on one hand and the economics of coal usage on the other—which go to determine valuation.
Also, typically issues of operational and enterprise risks get discounted at the bidding stage, and this makes operationalizing the acquired asset a tough proposition subsequently, he added.
India has a known coal gross resource base of 264,000 mt, the fourth largest in the world, of which proven reserves are around 101,000 mt. Demand is around 600 million tonnes per annum (mtpa) and is set to touch 2,340 mtpa by 2030.