Jindal Steel and Power will acquire a little over 10 per cent stake in Gujarat NRE Coal’s Australian subsidiary,Gujarat NRE Coking Coal Ltd,for AUD 25 million (about Rs 135 crore). Besides,JSPL will also buy 5 million tonnes of coking coal over a 10-year period from the Australian subsidiary of the Kolkata-based firm,Gujarat NRE said in a filing to the BSE.
“Gujarat NRE Coking Coal Ltd is pleased to announce that it has entered into an Option Off Take agreement with Jindal Steel and Power (JSPL) and would also make a placement of new shares in favour of Jindal Steel and Power (Mauritius) Ltd,” it said.
As per the agreement,Gujarat NRE Coking Coal,which is listed on the Australian Securities Exchange,will sell 100,000,000 shares to JSPL at a price of AUD 0.25 per share. The share sale would amount to acquisition of 10.07 per cent stake by JSPL,going by the total issued shares at 993,137,858 of the Gujarat NRE Coking Coal as on March,2012. According to the statement,placement of shares will be closed by May 30.
“We are extremely pleased to introduce JSPL as a long term strategic partner and investor in the company. This is a win-win deal for both parties,since it provides secured supply of premium hard coking coal to Jindal Steel,while it diversifies the customer base of (our) company,” the Executive Chairman of the company,Arun Kumar Jagatramka,said. The deal marks second strategic investment by JSPL in a month in Australian natural resource assets. On May 8,it had signed a deal to acquire 9.25 per cent stake in iron ore miner Apollo Minerals for about AUD 1 million (about Rs 5.30 crore). With the deal,JSPL has also secured a long term supply source for its coking coal requirements as it has plans to have a 15 million tonne per annum steel making capacity by 2015.
According to the deal,JSPL will buy 5 million tonnes (MT) of coking coal in 10 years or 5 lakh tonnes every year at a benchmark linked price. Besides,the company also has option to increase it further by additional 5 lakh tonnes in a year. Gujarat NRE’s Australian subsidiary operates two coking coal mines in southern coal fields of New South Wales,Australia. Both the mines are estimated to have total coking coal reserves of 125 MT and resources of 651 MT. Last week,Gujarat NRE had announced to provide guarantee of up to AUD 100 million (about Rs 500 crore) to the Australian subsidiary,Gujarat NRE Coking Coal,so that it can borrow money to avail its working capital requirements. Shares of Gujarat NRE closed up 3.23 per cent at Rs 17.60 on BSE. However,JSPL shares were down 0.50 per cent at Rs 454.15 apiece on BSE.