Home >companies >news >International Coal Ventures may bid for Rio Tinto Group’s Benga project
Rio is looking to exit Benga, which it acquired in 2011 as part of its A$3.9 billion ($3.7 billion) purchase of Sydney-based Riversdale Mining Ltd. In 2013, Rio said it would book $14 billion in writedowns on failed deals in coal and aluminum. Photo: Bloomberg
Rio is looking to exit Benga, which it acquired in 2011 as part of its A$3.9 billion ($3.7 billion) purchase of Sydney-based Riversdale Mining Ltd. In 2013, Rio said it would book $14 billion in writedowns on failed deals in coal and aluminum. Photo: Bloomberg

International Coal Ventures may bid for Rio Tinto Group’s Benga project

International Coal Ventures may limit its offer for Rio's 65% stake to less than `1,500 crore to avoid having to get Indian government approval

New Delhi/Mumbai: A group of Indian state-run metal and mining companies seeking cheaper sources of coking coal is considering bidding for Rio Tinto Group’s Benga mine in Mozambique, two people familiar with the plan said.

A team will visit the African nation from 23-25 June for final due diligence, said the people, asking not to be identified before an announcement. While no price was disclosed, International Coal Ventures Pvt. Ltd. will limit its offer for Rio’s 65% stake to less than 1,500 crore to avoid having to get Indian government approval, one of the people said.

ICVL chief executive officer Ajay Mathur declined to comment when reached on his mobile phone. A spokesman for Rio Tinto in London declined to comment.

Rio is looking to exit Benga, which it acquired in 2011 as part of its A$3.9 billion ($3.7 billion) purchase of Sydney-based Riversdale Mining Ltd. In 2013, Rio said it would book $14 billion in writedowns on failed deals in coal and aluminum. This included reducing the valuation of the Mozambique acquisition by 70% because of transportation hurdles and a cut in recoverable coking coal estimates.

The Benga mine, which started commercial production in the third quarter of 2012, has been working to cut operating costs and increase productivity, Rio said in its latest annual report.

Mining at Benga was suspended from mid-December 2013 to mid- January 2014 to reduce stockpiles.

First purchase

A deal would be the first acquisition for ICVL, formed in 2009 with investments from steelmakers Steel Authority of India Ltd (SAIL) and Rashtriya Ispat Nigam Ltd, iron ore producer NMDC Ltd, Coal India Ltd and power generator NTPC Ltd to buy coking coal mines overseas.

In 2011, ICVL retreated from making a counter offer to Riversdale, which owned Benga in a venture with Tata Steel Ltd. Tata continues to own 35% of Benga, which also holds thermal coal.

Coking coal quarterly contract prices, which climbed to a record $330 a metric tonne in June 2011, dropped to $165 a tonne in less than two years. Prices have slumped to $120 for the current quarter ending 30 June.

Rio, Anglo American Plc and BHP Billiton Ltd are among global mining companies to have cut back investments in thermal coal projects amid slumping prices and a supply glut.

While they exited the Abbot Point coal port expansion project in Australia’s Queensland state, Glencore Plc, the world’s biggest exporter of the fuel, last year halted work on the Balaclava Island export terminal in Queensland because of poor market conditions and overcapacity.

Power-station contract coal prices at Australia’s Newcastle port, considered an Asian benchmark, traded at a near-five-year low of $71.85 a ton this week, according to data compiled by Bloomberg. Bloomberg

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