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ICVL eyes 59% stake in Mozambique coal firm

ICVL eyes 59% stake in Mozambique coal firm
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First Published: Sun, Jun 05 2011. 11 33 PM IST
Updated: Sun, Jun 05 2011. 11 33 PM IST
New Delhi: State-run International Coal Ventures Pvt. Ltd (ICVL) is evaluating an opportunity to buy a 59% stake, estimated to cost around $1 billion (Rs 4,490 crore), in Minas de Revuboé, which owns the Revuboé coal mining project in Mozambique.
ICVL is considering to acquire this stake currently owned by Australia’s Talbot Group. The greenfield metallurgical coal mining project, with an estimated reserves of 700 million tonnes (mt), is owned by Minas De Revuboé, with Talbot Group being the project manager. Other stakeholders in the company are South Korean steel maker Posco, Japan’s Nippon Steel and the Mozambique government.
“Talbot Group’s stake is on offer. We are evaluating the opportunity for submitting a non-binding bid,” said an ICVL executive, who did not want to be identified.
Rothschild is the merchant banker for the deal.
Another top ICVL executive, who also requested anonymity, confirmed the proposal but declined to comment further.
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 coal assets overseas and has been competing with Chinese coal miners such as China Shenhua Energy Co. Ltd and Yanzhou Coal Mining Co. Ltd, which are actively buying overseas mining concessions.
While Talbot Group could not be contacted, questions emailed to the spokespersons of Minas de Revuboé and Rothschild’s Mumbai office on Friday remained unanswered at the time of going to press.
Indian businesses have in recent years made inroads into the mining and cashew processing industries in Mozambique, a former Portuguese colony, which has seen stable administration since the end of a civil war in the early 1990s.
India does not have substantial good quality metallurgical coal reserves. Demand for the resource in 2009-10 was 40 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.
While private Indian firms have been successful in securing coal resources overseas, government-owned entities such as ICVL and NTPC have not been successful. Bids by Indian miners tend to be relatively uncompetitive because most Indian companies seek the coal for their own end-use projects, while rival bidders may have higher-margin alternative plans.
“There is no reason why the public sector units can’t secure assets. In fact, they have a much better chance as they have access to government’s support,” said Shubhranshu Patnaik, senior director, energy and resources, Deloitte Touche Tohmatsu India Pvt. Ltd.
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 mt per annum (mtpa), which is set to touch 2,340 mtpa by 2030.
utpal.b@livemint.com
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First Published: Sun, Jun 05 2011. 11 33 PM IST