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Coal India uses deal sweetener to land Mozambique blocks

Coal India uses deal sweetener to land Mozambique blocks
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First Published: Sun, Sep 14 2008. 10 40 PM IST

Bridging gap: Coal India chairman Partha Bhattacharyya. Indranil Bhoumik / Mint
Bridging gap: Coal India chairman Partha Bhattacharyya. Indranil Bhoumik / Mint
Updated: Sun, Sep 14 2008. 10 40 PM IST
New Delhi: In an attempt to secure concessions to mine 40 million tonnes (mt) of coal per annum in Mozambique, International Coal Ventures Ltd, a special purpose vehicle formed by Coal India Ltd (CIL) and other public sector firms, is trying to use CIL’s infrastructure-building skills as a deal sweetener.
Bridging gap: Coal India chairman Partha Bhattacharyya. Indranil Bhoumik / Mint
“We have proposed to build local infrastructure including institutions such as Central Mine Planning and Design Institute Ltd (CMPDIL) in Mozambique in an attempt to get coal mining concessions,” Coal India chairman and managing director, Partha Bhattacharyya said.
CMPDIL is regarded as India’s premier resource exploration and development institute.
Coal India is keen to acquire equity in overseas coal blocks to bridge the gap between the demand and supply of the fuel in the domestic market, even as coal production in the country continues to decelerate.
“We will do the mining (in Mozambique). Raising money will not be a problem for the acquisition. CIL already has $4 billion (Rs18,320 crore) as cash reserves,” Bhattacharyya added.
The SPV also has companies such as Steel Authority of India Ltd, Rashtriya Ispat Nigam Ltd, NTPC Ltd and National Mineral Development Corp. Ltd as partners. It plans to invest $1.5 billion to develop coal mines having 10 billion tonnes of gross reserve in Mozambique, once it gets the concession.
“Mozambique currently does not have any major operating coal mines, but has a large number of prospecting and exploration tenements held by global mining majors. The country may have potential to be a source for Indian coal requirements, but may have lead time involved in reserves assessment and mine development,” said said Dipesh Dipu, principal consultant, mining, with audit and consulting firm PricewaterhouseCoopers.
“There may also exist challenges of support infrastructure and socio-political balance, which have had telling impact on mining sector of the country in the past,” Dipu added.
However, the company faces stiff competition from Brazilian iron ore firm Companhia Vale Do Rio Doce—a company that Coal India had lost out to, for a coal block in Mozambique around two-and-a-half-years back.
“If we feel that joining hands with private sector will help, we will be open to partner with them for the same,” Bhattacharyya said.
He declined to elaborate.
Mint had reported on 5 May about Coal India’s plan to partner with private sector companies such as Reliance Power Ltd, part of the Reliance-Anil Dhirubhai Ambani Group, to acquire coal blocks overseas.
India has 256 billion tonnes of coal reserves, of which around 455mt is mined every year. The country currently imports around 40mt of coal.
Demand for the fuel is expected to reach about 2 billion tonnes per annum by 2031-32, about five times the current rate of extraction, with the maximum demand coming from the power sector.
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First Published: Sun, Sep 14 2008. 10 40 PM IST