KOLKATA (miningweekly.com) - Indian steel producer Rashtriya Ispat Nigam Limited (RINL) has thrown its hat in the ring for a grand merger with the country’s largest iron-ore miner, NMDC Limited.
The Indian government was already working on a proposal to merge KIOCL, an iron-ore pellet producer, with NMDC, and adding RINL into the merger plans would create a government-owned monolith across the steel value chain, a senior official in the Steel Ministry said.
The official pointed out that all three; NMDC, RINL and KIOCL, had already established synergies through collaborations and this would be reinforced in a merged entity, complementing their respective strengths and plugging weaknesses in the operations of each.
For example, RINL was the only government-owned steel producer which did not have captive sources of iron-ore supply and was entirely dependent on NMDC for merchant purchase of raw materials.
The three companies earlier this year signed a memorandum of understanding (MoU) to construct a six-million-tonne-a-year pellet plant at the southern Indian port town of Visakhapatnam, where RINL’s 6.3-million-tonne-a-year steel plant was located.
Under the agreement, RINL would provide the land, KIOCL (formerly known as Kudremukh Iron Ore Company Limited) the technology for pelletisation and NMDC would provide low-grade iron-ore fines and rejects from its mines across the provinces of Karnataka and Chhattisgarh.
Each of the partners in the joint venture would have the option to buy back the pellet production as per their own production planning or merchant sales in domestic and overseas markets.
At the same time, the three companies had also agreed to construct a 13-million-tonne-a-year slurry pipeline connecting NMDC’s mines, at Chhattisgarh, to Visakhapatnam, to transport ore to RINL’s steel plant.
These collaborative projects were a clear reflection of operational synergies between the companies, vindicating a merger of the three, which were already under administrative control of the Steel Ministry, the official said.
As reported by Mining Weekly last month, the Ministry had received a report prepared by PwC, which recommended a merger of KIOCL and NMDC. The recommendation was based on the fact that while KIOCL had the necessary technology for value addition to iron-ore, its balance sheet was weak, while NMDC's strong financials and access to large iron-ore resources would ensure the operational and financial efficiency of the merged entity.
NMDC was constructing a three-million-tonne-a-year steel plant in Chhattisgarh, entailing an investment of around $2.5-billion, which was scheduled for completion in 2015/16, and the suggested induction of RINL, with extensive experience in the production of high value steel products would infuse operational and marketing management into the merged company, the official said.