You can't dress up El Mutun as a spring lamb!
Published by MAC on 2012-06-05Source: Business News Americas, Economic Times
What was projected as Bolivia's biggest new foreign investment looks like being on the rocks.
The massive Indian conglomerate, Jindal Steel and Power, is now poised to pull out of the El Mutun iron and steel venture.
It seems increasingly clear that inviting Jindal S&P into the project in the first place was a massive error of judgment on the part of the Morales administration.
Had it performed due diligence on the Jindal's - or simply asked a few Indian civil society groups about the company's appalling track record in its home country - Bolivians at large ( not least thousands of workers) might not have been held to ransom over the past few years.
The extent to which the Indian government inveigled its Bolivian counterpart into the ill-advised scheme isn't known, but it must have played a significant role.
Engineering "South to South" cooperation is a deceptively seductive mantra. And it's a dangerous one to adopt when one party is so much more powerful than the other, and unabashed to propagate its own brand of neo-colonialism.
It's highly likely that, if Bolivian civil society organisations had been left to consider whether El Mutun could be financed, and generate markets, from within Latin America, it would never have left the drawing board. At least not on the scale that eventuated.
Now, the only apparently secure contract to take output from El Mutun has been beset by delays, community protests and strikes. The only project component which would have enabled Bolivia to capture added value - a domestic steel plant - has foundered.
Nor, we pointed out last November, should much hope have been pinned on China as the ultimate buyer of El Mutun's iron or steel. See: Bolivian government threatens to take over half an Indian mine
All in all, Mutun seems like a huge white elephant.
Some might say it's also a sore reflection on Morales' woeful abdication of the brand of socialism he was so keen to advocate on coming to power.
[Comment by Nostromo Research, 1 June 2012]
Civic committee looking into regional company to develop 50% of El Mutún - Bolivia
By Harvey Beltrán
Business News Americas
28 May 2012
The Pro Santa Cruz civic committee of Bolivia's Santa Cruz department is proposing the creation of a regional joint venture mining company by the government of the department, municipalities and state mining corporation Comibol to develop half of the El Mutún iron ore project, José Padilla, an adviser to the committee, told BNamericas.
"Previously, I proposed to create a regional company that together with ESM [the state steel company set up to develop El Mutún] and Comibol, could develop the other 50% of El Mutún" that is not in the hands of a JV involving India's Jindal, he said.
Padilla's idea was that if things do not go according to plan for Jindal Steel & Power - which is in charge of developing 50% of the project in a venture with ESM and Comibol, that would also involve building a steel plant - another company would develop the other half of the deposit.
"Now given the situation with Jindal, we're analyzing whether to continue with the project and guarantee some 3,000 jobs," he added.
Padilla also stressed the need to seek other energy alternatives to avoid being affected by the same problems of gas supply facing Jindal.
The civic committee of Santa Cruz's Germán Busch province, where El Mutún is located, declared a 24-hour general strike last Friday to demand the development of the iron ore mine and steel project.
The community has been protesting since Jindal announced that it is evaluating whether to continue with the venture due to what it calls contradictions from the government, as well as the lack of a gas supply contract and the delay in receiving the land for the project.
El Mutún is located in a 65km2 area of Germán Busch province and has 40Bt in reserves grading 50% iron ore.
Naveen Jindal to drop $2.1 billion Bolivia investment plan: Report
Economic Times (India)
28 May 2012
NEW DELHI: Naveen Jindal-led Jindal Steel and Power's (JSPL) ambitious $2.1-billion investment plan in Bolivia is all but over as the company has said it is "not hopeful of continuing" with the project, which was touted as the biggest foreign investment plan in the Latin American country.
Through its subsidiary Jindal Steel Bolivia (JSB), the company had in 2007 secured 40-year development rights to the El-Mutun iron ore mine, which holds reserves of around 20 billion tonnes, considered to be one of the largest untapped iron ore deposits in the world.
However, with no commitment from the Bolivian government over supply of natural gas - which is critical for the project - it seems to be headed for a failure. "I see no progress in the project. We are not very hopeful of continuing ," Sushil Maroo, company CFO and a director on JSPL's board, told TOI here.
For the project, the gas requirement is estimated at 0.5 million metric standard cubic metres a day (mmscmd) in 2014. By 2016, it will increase to 6 mmscmd and in 2017, the project will require a daily supply of 10 mmscmd of gas.
However, the company is yet to get any firm commitment on gas allocation for the project. The company's agreement with the Bolivian government also included setting up of an integrated 1.7-million-tonne-perannum (mtpa) steel plant, 6- MTPA sponge iron and a 10-MTPA iron ore pellet plant.
Maroo said JSPL's Bolivian subsidiary has invested $100 million over the last few years for production of iron ore, development of infrastructure and CSR (corporate social responsibilities ). However, without any firm commitment on gas availability, the investments are not of much use. "We also understand that the Bolivian government does not have gas," he said.
Adding fire to the already sore relations between JSB and the Evo Morales-led Bolivian government is encashment of two bank guarantees ($18 million each) by the Latin American country.
The Bolivian government has done so after accusing JSB of not honouring contractual obligations with regard to the progress of the project. While the first bank guarantee was encashed in 2010, the second one has been done this month. "This causes a rift with the Bolivian government ," Maroo said.
JSB has sought the intervention of the International Court of Arbitration over enchashment of the first bank guarantee. "We will be doing so for the second one soon." Just as JSB sulks over non-availability of gas, the Bolivian government has also taken an equally rigid stance.
Bolivian mining minister Mario Virreira was quoted earlier this month as saying that it would be best if Jindal quits the project so the country can find another investor.
Santa Cruz civic committee offering to serve as mediator to reactivate El Mutún - Bolivia
By Harvey Beltrán
Business News Americas
1 June 2012
Bolivia's Santa Cruz department civic committee has offered to serve as mediator between India's Jindal Steel & Power and the government to find a solution to reactivate the El Mutún iron and steel project, the committee's communications director, Hugo Salvatierra, told BNamericas.
"There have been announcements from the company and the government that make us worried that neither has the desire to solve this problem," Salvatierra said.
The committee is willing to act as a mediator in the conflict that has already led to a general strike in Germán Busch province and the removal of state steel company ESM's president, he said.
Salvatierra also reiterated concerns over the lack of priority the government has placed on the issue, considering the number of jobs the project is meant to generate.
For now, the communities of Germán Busch province are waiting for the government to announce an alternative to allow for the reactivation of the project's development.
ESM and state miner Comibol partnered with Jindal to develop the deposit and build a steel plant, but now Jindal is evaluating whether to continue with the project due to the lack of a gas supply contract and the delay in receiving land, among other things.
El Mutun is located in a 65km2 area of Santa Cruz's Germán Busch province and has 40Bt in reserves grading 50% iron ore.