JSW acquires coal mines in Mozambique

JSW acquires coal mines in Mozambique

Baiju Kalesh, Times News Network

16th August 2006

MUMBAI: Sajjan Jindal-controlled JSW group is the latest to acquire foreign coal mines after the fruitful forays of peers such as Ispat Industries and Tata Steel.

Last week, the JSW group finalised the acquisition of a 200 million tonne coal mine in Mozambique, a small African country. Jindals will pay $6 million as token which will be followed by royalty payments as they mine coal.

Last month Mittals of Ispat Industries bought a 45 million tonne Colombian coal mine for $150 million to fire furnaces at Dolvi plant that can produce three million tonne of steel a year and other units abroad that have a capacity of 12 million tonne.

"The mine can feed the Dolvi unit for close to 15 years," a senior JSW official said. The cost of coal after royalties is likely to be about $48-50 per tonne compared to the current price of about $114 per tonne in the international market.

Low input cost will, in turn, help the company lower its cost of production, a strategy pursued by the Tatas to emerge as one of the cheapest producers of steel in the world.

Tata Steel, the country's second-largest steel maker and the only company to have adequate coal mines, however, had chosen a different strategy to secure long-term coal supplies.

It acquired a 5% stake in Carboraugh Downs, an Australian coal mining firm. With both captive iron ore and coal mines the company managed to reduce costs significantly. Sources say that it makes a tonne of steel for as little as Rs 10,000 compared to others who spend about Rs 12,000-15,000 per tonne.