Economy

India Consortium Step Closer To Iron Ore Mining In Afghanistan

Dow Jones
Tuesday, 22-May-2012

 

NEW DELHI: A consortium of seven Indian companies has received a letter of intent from the Afghanistan government, bringing it a step closer to mining iron ore in the country's Hajigak province, The group won the right to mine three iron-ore blocks in Afghanistan in November.

The letter of intent is an initial agreement to be followed by a formal joint venture pact.

"We hope to sign a joint venture agreement [with the Afghan government] soon," said C. S. Verma, chairman of the Steel Authority of India Ltd. (500103.BY), which leads the consortium.

The Indian group also includes state-run NMDC Ltd. (526371.BY) and Rashtriya Ispat Nigam Ltd., and private sector firms JSW Steel Ltd. (500228.BY), Jindal Steel & Power Ltd. (532286.BY), JSW Ispat Steel Ltd. (500305.BY) and Monnet Ispat & Energy Ltd. (513446.BY).

Verma said SAIL is also in the final stages of discussions about building a steel plant in Afghanistan.

Indian steel companies are desperate to secure iron ore and coking coal as the cost of imported fuel continues to rise. Access to new reserves in India often involves extensive litigation and delays in receiving environmental and other regulatory clearance.

Hajigak's iron ore mines have estimated reserves of 1.8 billion metric tons.

Separately, SAIL hopes to complete an INR720 billion ($13.21 billion) expansion of capacity at its plants across the country by June 2013 that would raise its annual steel production capacity to 23 million metric tons from 14 million tons, Verma said.

He said the company had made progress in talks with South Korea's POSCO (005490.SE) about forming a joint venture in eastern India with a production capacity of 3 million tons a year.

Verma didn't disclose the likely stakes in the joint venture.

The joint venture with POSCO would give SAIL access to technology that would help it access vast reserves of low-grade iron ore at its Jharkhand mines.

The venture would give POSCO a foothold in eastern India, where it has sought to set up a steel plant for the past six years.

Separately, Verma said a consortium of state-run companies formed to acquire coal assets overseas would have to be recast if Coal India Ltd. (533278.BY)--which enjoys a near monopoly on the coal business in India--proceeded with plans to leave the consortium.

A Coal India executive last week said the company planned to leave the consortium. While SAIL wants to acquire coking coal needed to make steel, Coal India wants thermal coal needed to produce power, a coal ministry official said.

 

 

 

 

 

 

 

 

 

 

 

    

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