Jindal Steel Bags Bolivian Mines

Jindal Steel bags Bolivian mines

Business Standard, Mumbai

30th May 2006

Mixed results for India Inc in overseas markets.

Jindal Steel and Power (JSPL) of the $4-billion OP Jindal group has emerged as the sole bidder for developing Bolivia's largest iron ore mines.

Its sole rival, the LN Mittal-promoted Mittal Steel, was disqualified by the Bolivian government late last week for "not meeting the required conditions."

Confirming the development, JSPL officials said: "The Bolivian government is expected to get back to the company tomorrow and formally announce the bid's result." JSPL Executive Vice-Chairman and Managing Director Naveen Jindal was unavailable for comment.

Industry sources said the Indian company would have to invest $1.5 billion (about Rs 6,750 crore) over the 40-year term of the contract. The El Mutun iron ore mines, located near the Bolivian-Brazilian border, have proven reserves of 40 billion tonne.

The deal will also benefit the Andean country. Its government estimates it can earn about $250 million in iron ore exports every year and employ almost 2,000 people. The operations can help produce up to five million tonne of steel annually.

The Indian company may also set up a steel plant in Bolivia. "The Bolivian government requires the contract-winning company to not only extract iron but also industrialise its production into steel, using the country's plentiful natural gas," the industry sources pointed out.

Delhi-based JSPL has been looking at various options in the domestic market as well as overseas to meet its iron ore needs.

Its mega investment plans in the country include the six-million-tonne steel plant in Orissa, another five-million-tonne plant in Jharkhand and a 1,000-Mw pithead power plant in Raigarh.

These three projects involve an investment of almost Rs 30,000 crore.

JSPL is the latest among Indian metal majors hunting abroad for raw materials. Last year, the country's largest private steel producer, Tata Steel, bought a five per cent stake in an Australian coal mine.

The Aditya Birla group's flagship Hindalco had acquired two copper mines Down Under and its Australian subsidiary was recently listed on the local stock exchange. Another steel major, the Essar group, is in talks with the Guyana government for manganese and iron exploration.

Five companies initially bid for the Bolivian mines. The list included China's Shandong Luneng Hengyuan Trading Group, a joint venture between Argentina's Siderar SAIC and Techint Argentina SA, and the Brazil-based EBX Group.

Later, EBX was barred from participating by the Bolivian government over regulatory issues. Finally, JSPL and Mittal Steel emerged as the top bidders.

The latest development comes as a relief to the Indian company after speculations last month on the likelihood of the Bolivian government changing its policies. It had nationalised the petrol and gas sector and it was feared that this might be extended to iron ore reserves.