SAIL, RINL and NMDC, consortium members of ICVL under the administrative control of Steel Ministry, are keen to form special purpose vehicle (SPV) to buy Rio Tinto’s Mozambique Coal mines.
ICVL was formed with an objective to secure supply of metallurgical Coal and thermal Coal. It comprises of 5 members namely SAIL, NMDC, RINL, CIL and NTPC. Out of total, 3-member SAIL, NMDC & RINL have decided to form SPV for purchasing Coking Coal Assets in Mozambique as their primary need is Coking Coal.
NTPC & CIL have announced last month that they are not willing to take part in ICVL’s specified deals.
Projected deal involves 65% stake to buy Mozambique based Benga mine from which 35% venture belongs to Tata Steel. It also includes 100% stake in Zambeze and Tete East Coal assets.
As per some market participants, SPV for acquisition of Mozambique assets will strengthening their supply source and may give a logistical advantage as well. On the other hand, companies are increasing their production capacity, which anticipated that Coking Coal requirement will increase; perhaps acquisition helps to reduce their dependence on imports.
India is trying to diversify its sourcing of Coal through acquisition of different overseas assets. It will enable India to reduce both supply risks and manage price volatility.
SAIL faces Break-even Challenges
ICVL’s newly acquired mine, which led by SAIL, is losing USD 35/MT in production of Coking Coal. While, SAIL has stated that company is capable to reach at break-even point over upcoming 18 months at Benga mines.
SAIL accomplishes its 85% Coal requirements through imports, a key input to run steel plants.
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