KOLKATA (miningweekly.com) - India’s largest iron-ore miner NMDC Limited was set to acquire a coking coal asset in Russia within the next fortnight.

“We are looking at a coking coal asset of around 70-million tons that is small and manageable. We have sent a team for conducting due diligence and it will return on Sunday,” NMDC chairperson and MD Rana Som, said.

“Over the next 10 to 12 days, the NMDC board will study the presentation on the due diligence of the team and the board will take a final decision,” Som said.

The company was also conducting due diligence on the acquisition of another coal asset in the US, Som said, without divulging details of the mine. Last week, NMDC finalised the acquisition of 50% stake in Legacy Iron Ore Company.

However, despite these acquisitions by NMDC, India’s newly appointed Coal Secretary Alok Petri said that procedural bottlenecks and drawn out decision making by government-controlled mineral and metals companies were the main reasons India failed to acquire large mining assets overseas.

“Companies like Coal India Limited (CIL) and Steel Authority of India Limited (SAIL) have a huge corpus of funds for overseas acquisition. But by the time the number of mandatory procedures and government formalities were completed somebody else had gone ahead and acquired the targeted asset,” Petri said.

“In this respect companies in the private sector are at an advantage because of quick decision making. It is for the government to ensure that this risk factor is reduced and government companies have a level playing field, if they are to make big ticket acquisitions overseas,” he said.

For example, Indian Coal Ventures Limited (ICVL), a special-purpose company floated in 2008 had failed to secure any coal asset overseas to date despite having a fund of $2-billion. CIL, the world’s largest coal producer, SAIL, the country’s largest integrated steel producer and NTPC, the largest electricity generating utility were major stakeholders of ICVL, which was mandated to acquire coal assets from overseas exclusively in order to supply feedstock to ICVL’s principal shareholding companies.

Similarly, CIL which was negotiating for coal assets with Golden Energy Mines, Indonesia and Massey Energy, US for mines in Indonesia, Australia and the US, was hamstrung in taking a final decision since formal clearance for making these acquisitions was still pending with India’s Finance Ministry.

“Once approval from the Finance Ministry comes, the offers for acquisitions are not there anymore, and we will be forced to scout afresh,” CIL chairperson and MD N C Jha said.

Meanwhile, NMDC and Russian steel producer Severstal were in talks about a swap deal of mining assets between the two companies. It has been proposed that one coking coal asset in Russia would be transferred to a separate NMDC and Severstal joint venture (JV) and on a reciprocal basis, an Indian iron-ore mine controlled by NMDC would be transferred to another similar JV company.

NMDC and Severstal have signed a JV agreement to construct a five-million-ton-a-year steel mill in the southern Indian province of Karnataka entailing an investment of $5-billion. The coal and iron-ore assets swap would ensure iron-ore supply security to Severstal and similarly assure coking coal supplies to the proposed steel plant in India.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.