SAIL may partner RINL,Tata for Oman venture

NEW DELHI: Private sector steel maker Tata Steel together with public sector Steel Authority of India (SAIL) and Rashtriya Ispat Nigam (RINL) may form a consortium to pick up a majority stake in limestone mines in Oman.

SAIL is likely to initiate talks with Tata Steel and other private sector steel companies to form a consortium that would pick up majority stake in virgin limestone deposits in Oman along with a local company, government sources said. It is understood that Tata Steel is already scouting for limestone mines in Oman.

The proposed consortium will try to pick up 70% stake in the mines, an official said. As per stringent holding norms in Oman, overseas investors could pick up only up to 70% in a project, while the remaining will be held by the local company.

The venture would benefit all Indian companies as it would substantially reduce raw material cost for steel makers with limestone prices in Oman being cheaper by over 40% than Indian prices.
While the FoB value of limestone bought from Oman will work out to about $5 per tonne, the same is sourced domestically from traders at over $8.5 per tonne.

Sources said that government of Oman has offered India participation in limestone mines that find little use there. Consequently, a team from SAIL visited the place to identify prospective mine.
“We are still to work out how much stake each partner in the Indian consortium would pick up the proposed joint venture company. If Tata refuse to join the venture, SAIL and RINL would jointly pick up the majority stake,” official sources said.

It is understood that SAIL may give in-principle approval for negotiations on the Omanese venture at its meeting scheduled on December 6, 2006. This would be followed by appointment of a merchant banker to formulate the modalities of investment. “If all goes well, deal is expected to finalised in the firsts half of next year,” said the sources.

Limestone is used in blast furnace to reduce impurities from iron ore that is melted to form hot metal and steel. The by-product under this process is slag that is also used for cement manufacturing. Lime is also the melting shop to further remove impurities. For every tonne of steel produced, about 10 kg lime is required.

The acquisition is expected to benefit all companies for meeting their future expansion needs. While SAIL is expending its steel capacity from 14 million tonne to 22.5 mt, RINL’s capacity is set to double from 3.5 million tonne to 8 million tonne. Tata Steel is also undertaking expansion of its Jamshedpur facility raising capacity to up to 10 mt. Moreover, it has proposed greenfield projects in Orissa, Jharkhand, Chattisgarh.