A special purpose company created by a consortium of state-run metal and mining companies has inked an agreement with global mining firm Rio Tinto to buy stake in three prime coking coal assets in Mozambique for Rs 300 crore.
This is the first project acquired by International Coal Ventures Limited (ICVL), the company created by Steel Authority of India, Coal India, Rashtriya Ispat Nigam, NTPC and NMDC Limited in five years after it was set up in 2009.
As per the agreement signed on Monday, ICVL will buy Rio Tinto’s 65 per cent stake in Benga, and a 100 per cent stake each in Zambeze and Tete East coal projects with total reserves of 2.6 billion tonnes. Benga, in which Tata Steel has the remaining 35 per cent stake, is the only mine operational with the remaining two are being developed. ICVL has planned to explore the coal assets for tapping coal bed methane.
ICVL has acquired these three mines which Rio Tinto had bought through acquisition of Riversdale Mining Limited in 2011 for $ 4 billion. However, in 2013, it wrote off $3.5 billion of the purchase price which had reportedly cost the job of one its senior executive. Rio Tinto, in a statement said, the sale is subject to certain conditions precedent and regulatory approvals. The transaction is expected to close in the third quarter of 2014.
During the transition to the new owner, Rio Tinto will continue to manage the mine to the highest safety and environmental standards. Rio Tinto’s other assets in the country are unaffected by this transaction, it said. Financing the buy will not be difficult for ICVL as its authorised capital is Rs 10,000 crore. SAIL and CIL each hold 28 per cent share and RINL, NMDC and NTPC hold 14 per cent each. The company has a Navaratna status.
According to ICVL chairman CS Verma, the significance in purchasing the mines because the Moatize basin in Mozambique is second to Australia’s Bowen basin in terms of coking coal reserves.
“The coal resource will become a long-term captive source of a critical raw material in steel making in geographical proximity to India,” he told The Indian Express.
Verma believes that the acquisition would give SAIL and RINL a strong foothold in this coal basin helping with raw material to fuel expansion.