Jindal Steel says Bolivia encashed $18 mn guarantee

Jindal Steel says Bolivia encashed $18 mn guarantee
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First Published: Fri, May 14 2010. 03 31 PM IST
Updated: Fri, May 14 2010. 03 31 PM IST
New Delhi: India’s Jindal Steel & Power on Friday said the Bolivian government has encashed its entire $18 million bank guarantee for the El Mutun project in violation of the contract.
The steelmaker said it was negotiating with the Bolivian government to resolve the dispute shortly.
“We wrote to them (Bolivia government) that this encashment is wrong, against the contract terms and you must reinstate the whole thing,” director Sushil K. Maroo told Reuters in an interview.
The 40-year contract gives Jindal the right to mine about half the El Mutun site, which is believed to contain one of the world’s largest iron ore reserves, though they are said to be of medium-grade quality.
As per the contract, which became effective in July 2009, Jindal is required to make an investment of $1.5 billion in five years. The government can encash part of the bank guarantee, proportionate with the shortfall in target investment at the end of five years, Maroo said.
“The issue is getting resolved shortly,” Maroo said, adding they were engaged in negotiations with the government on this.
Last month, Sergio Alandia, head of El Mutun Iron and Steel Co, a state-run unit charged with overseeing the El Mutun project, said Jindal wants to produce 40% less steel and around 20% less iron a year than initially agreed for the project.
Maroo blamed lack of infrastructure support in Bolivia for seeking changes in the terms of the contract.
“Modifications that were asked for was because it was not possible to do it (at the originally agreed terms) because of country’s infrastructure,” he said.
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First Published: Fri, May 14 2010. 03 31 PM IST