KOLKATA (miningweekly.com) – India’s Singareni Collieries Company Limited (SCCL) is considering buying an equity interest in a US coal mine which could supply it with at least two-million tonnes a year of coal.

A company official declined to identify the affected mine, saying a due diligence was yet to commence and that SCCL and the US company that owns the coal mine had signed a confidentiality clause.

The official said that, according to preliminary talks and an offer submitted by the US company, a separate joint venture company would be floated, with SCCL picking up a minority equity stake in the venture in return for a minimum offtake of two-million tonnes a year from the mine.

A memorandum of understanding would be signed between the two companies after completion of the due diligence, technical and financial parameters and assessment of gross calorific value of coal that would be available from the mine, he pointed out.

Further, the official said that the current low international prices of commodities, including coal, were expected to continue in the medium term and would offset higher shipping costs for transporting the coal from the US to India.

A primary acquisition assessment undertaken by SCCL had determined that, with natural gas fast replacing coal as feedstock for electricity generation in US markets and with the resultant depressed demand for coal, Indian investors could expect favourable valuations for investing in coal assets in the US and this too could offset higher logistics and shipping costs.

SCCL had received a total of 13 offers to acquire equity stakes in coal blocks overseas as it moved to establish fuel linkages for its thermal power plants in India. The offers included three mines each in Indonesia and Australia and two mines each in Mozambique and Botswana.

Unofficially, SCCL officials conceded that the mining and business environment in African countries would be a "challenge".

Further, the quality of coal available in Mozambique and Botswana was uncertain, with the officials pointing to Coal India Limited's recent announcement that it would pull out of its investment in Mozambique on the grounds of inadequate infrastructure and the poor quality of coal available.