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India’s HCL seeking local contractors for MDOs

29th August 2017

By: Ajoy K Das

Creamer Media Correspondent

     

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KOLKATA (miningweekly.com) – India’s sole integrated copper producer, Hindustan Copper Limited (HCL), has decided against engaging foreign contractors as mine developer operators (MDOs) for any of its future mining projects in the country.

In the wake of a face-off with Perth-headquartered India Resource Limited (IRL), the HCL board has determined that, going forward, it would be mandatory for a foreign contractor to tie-up with an Indian entity to be eligible to bid for an HCL project.

IRL terminated an MDO contract with HCL for the Surda copper mines, in the eastern province of Jharkhand in June this year, citing “significant cash flow issues” following industrial unrest owing to HCL’s failure to reimburse a 40% statutory increase in wages. IRL also accused HCL of making “unilateral deductions from amounts due to IRL for copper production without having regard to its impact on the ongoing operations”.

IRL has subsequently gone into voluntary administration.

However, the Indian copper refiner has maintained that the notice for termination was “unilateral, wrongful and in breach of a contract” for which HCL was entitled to claim liquidated damages from IRL. HCL has also disputed failure on its part to honour the monthly payments for a continuous period of 90 days from date of submission of bills.

The HCL-IRL dispute has affected the operations of the Surda mines, which according to one estimate are producing at about 10% of monthly production capacity.

Earlier this month, HCL appointed Sriram EPC, an Indian company to operate the Surda mines on a short term contract for six months until such time as the copper refiner is able to finalise a long-term contract. This time, HCL will prefer an Indian contactor or a foreign contractor with an Indian partner, a company official said.

The fallout with IRL, and the new mandatory conditions for any new MDO, are significant, coming as they do just ahead of HCL firming up a slew of new mining investments across its copper assets in the country.

HCL has lined up an investment to the tune of $781-million over the next three years to ramp up copper ore extraction capacity and cathode manufacturing.

The company is also in the process of negotiating with MDOs, or partners, seeking an additional $187-million investment for expansion and development of its Rakha and Chapri Sideshswar mines in Jharkhand, and a linked copper concentrate plant, and, according to the official, expressions of interest have been received from eight prospective partners for this integrated project.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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