NMDC sets sights on African coal assets

KOLKATA: National Mineral Development Corp, or NMDC, India’s largest iron ore miner, is in talks to buy a minority stake in Riversdale Mining, the Australian company that owns large coking coal assets in Mozambique.

The state-owned NMDC that supplies key raw materials such as iron ore to most steel companies, is also doing a due diligence for the Kolmar coal mines in Russia, chairman Rana Som said on Wednesday.

“We are interested in picking up about 10% equity in the (Riversdale) Mozambique project. We are looking at prospective mines in that country, jointly with Tata Steel,” said Mr Som. On the radar is a cluster of coal mines that Riversdale is developing, he added.

Sharp demand for key raw materials such as coal and iron ore has fuelled a race among global metal companies to own mines. This rush has pushed up valuations for such mines. High prices have now prompted companies to join hands and pool resources to buy such mines.

NMDC had recently tied up with Tata Steel to acquire mineral assets globally. The Jamshedpur-based steelmaker already has a 35% stake in the Mozambique project. Tata Steel already has an association with Riversdale, having signed a $100 million agreement for a 35% stake in two coal tenements of the Australian mining company in Mozambique in 2007.

Construction of stage 1 of the Benga project has started and is expected to be completed in second half of 2011.
NMDC’s move comes close on heels of its decision last week to enter into a new joint venture — Kopano NMDC Minerals — to acquire coal and coking coal assets in South Africa and Zimbabwe.

NMDC said it has also initiated due diligence for the Kolmar mines in Russia, as part of its bid to secure coking coal assets globally. If the deal comes through, it will mark NMDC’s first overseas foray into coal.

“We have started due diligence exercise for Kolmar on a exclusive basis. We are open to sharing it with local or other interested parties,” said Mr Som. NMDC plans to enter steelmaking on hopes that Russian coal will be used at proposed steel plants in Chhattisgarh and Karnataka.

Kolmar is a privately-owned property in Siberia’s Yakutia region and is owned by Russian tycoon Mikhael Prokhorov. It has four mines with good quality reserves estimated at over 100 million tonnes. “Earlier, a team of officials from NMDC had visited the mines and had taken a preliminary look at the prospects,” Mr Som added.

For Indian companies, however, Russia represents a difficult terrain. Hence, shipping coal to India all the way from Russia poses logistical challenges. Yet given the paucity of good quality coking coal reserves globally of late, domestic steel and coal companies have been homing in on Russia to secure raw material linkages.

Tata Steel managing director HM Nerurkar later said his company has no plans to sell its interests in its ferro chrome unit. Referring to media reports on Wednesday, Mr Nerurkar said buyers had approached Tata Steel to buy the Richard’s Bay plant. “We are not selling it,” he added.

The unit, Tata Steel KZN Pte, is a 1.5 lakh tonne ferro chrome venture and was built in South Africa’s Richards Bay area in 2006.