ICVL to acquire Rio Tinto’s Mozambique coal mine for $50 mn
30 Jul 2014
International Coal Ventures Pvt Ltd (ICVL), a joint venture between state-owned coal and steel companies, has signed an agreement to buy Rio Tinto's coal assets in Mozambique for $50 million.
ICVL, which has been jointly promoted by the Steel Authority of India, Coal India, Rashtriya Ispat Nigam and NMDC - all state-owned companies - will buy the Tete East project and the Benga mine, which Rio Tinto is offloading.
Rio Tinto had acquired these assets as part of a $4-billion acquisition of Riversdale Mining Limited in 2011 (See: Rio Tinto plans to de-list Riversdale).
However, in 2013, it wrote off $3.5 billion of the purchase price, which was partly responsible for then chief executive Tom Alabanese having to "step down".
ICVL signed the agreement on 28 July to buy Rio Tinto's 65-per cent stake in Benga and 100-per cent each in Zambeze and Tete East coal assets.
The acquisition, when completed, will bring to ICVL partners captive coal mines. The acquisition will also be the first of ICVL since its inception in 2009.
''The sale is subject to certain conditions precedent and regulatory approvals. The transaction is expected to close in the third quarter of 2014,'' Rio Tinto said in a statement today.
During the transition to the new owner, Rio Tinto will continue to manage the mine to the highest safety and environmental standards. Rio Tinto's other assets in the country are unaffected by this transaction, it said.
Benga, in which Tata Steel has the remaining 35 per cent stake, is the only mine operational with the remaining two being under development. There is significant potential for tapping CBM from the acquired coal resources.
Tata Steel had a 26.27-per cent stake in Riversdale, which it sold to Rio Tinto for A$1.06 billion (Tata Steel exits Riversdale with A$1 billion stake sale).
Benga produces prime hard coking coal and thermal coal and the production of the operating coal mine can be expanded to 12 million tonnes per annum (mtpa) from 5 mtpa now, ICVL said in a statement.
The acquisition will help ICVL, which enjoys 'Navratna' status, achieve its 2019-20 growth target of owning 500 million tonnes of coking coal reserves.
"The coal resource will become a long-term captive source of a critical raw material in steel making in geographical proximity to India. The coal mine and assets are located in the prime coking coal bearing region of the Moatize Coal Basin which is stated to be the second largest coal basin in world after the Bowen Basin in Australia," ICVL said.
The Mozambique acquisition is a significant and historic development towards assuring long-term coking coal security as Indian steel companies need higher input of raw material to fuel their growth, ICVL Chairman C S Verma said.
"This acquisition gives the steel companies under the ministry of steel a strong foothold in this sought after coal basin," he added.
SAIL and RINL are both increasing their capacity to 23 mtpa and 6.3 mtpa respectively and are expected to require coking coal of about 25 million tonnes by 2015. NMDC is also in the process of setting up a 3 mtpa capacity integrated steel plant at Nagarnar in Chhattisgarh.
