China offers Bolivia $15 billion to develop El Mutun iron ore deposit

China Development Bank has offered a $15-billion loan to the Bolivian government to develop one half of El Mutun iron-ore deposit concession.

The move comes just weeks after Jindal Steel & Power' (JSPL) entire $18-million bank guarantee was encashed by the Bolivian government last month for failing to honour its pledge to invest $2.1 billion in the other half of EL Mutun iron ore joint venture project under the time stipulated in the contract signed in 2007. (See: Bolivia encashes JSPL's $18-million bond on El Mutun delays)

The EL Mutun iron ore deposit is one of the world's largest iron-ore deposits located in the remote German Busch province in the Santa Cruz Department in Bolivia covering an area of 75 sq km, and estimated to hold about 40 billion tonnes of iron ore of 50 per cent grading, mainly in hematite and magnetite form.

JSPL, India's third largest steel producer in tonnage terms and revenues of $15 billion in 2008, had acquired the development rights for half or 20 billion tonnes of EL Mutun iron Ore in 2006 through a bidding process (See: JSPL to invest $2.1-billion to set up steel plants in Bolivia), while the other half that is yet to be developed, is owned by the Bolivian government. 

Late last month, sensing the problems and the opportunity at El Mutun, China moved in with a loan offer of $15 billion for developing the remaining half of the deposit, including building the necessary infrastructures like construction of a railroad, development of the port at Puerto Busch to export the iron ore, La Paz newspaper La Razon reported.

The offer was made to Empresa Siderurgica Del Mutun (ESM), a government of Bolivia entity that was set up to develop the EL Mutun iron ore deposit.