Thursday, June23, 2011, ET Bureau
NEW DELHI: Tata Steel, JSW and Jindal Steel have joined hands with staterun units SAIL, NMDC and Rashtriya Ispat Nigam to form a consortium that will bid for the Hajigak iron ore deposits in Afghanistan, considered to be the second largest in the world.
Fourteen Indian firms, of the total 22, had been short-listed to bid for the mines estimated to contain about 1.8 billion tonnes in reserve. Nearly as many firms had met in Delhi last month to discus the formation of the Indian consortium, according to people familiar with the development.
The public sector undertakings will own 60% with the three private steelmakers sharing the remaining equity. Seshagiri Rao, a joint managing director of JSW Steel , a key member of the consortium, confirmed the development. He, however, declined to comment on the equity stakes that was still being worked out.
The Hajigak deposits are widely believed to be larger than the conservative estimate of 1.8 billion tonnes made by Russian experts during their occupation of Afghanistan in early eighties. The mine has been broken into four independent blocks that is scheduled to be opened for bidding on August 3.
But some of the smaller firms are not convinced about the progress of the bid. Ramanuj Dutta Roy, a vice-president at Rashmi Metaliks, one of the companies shortlisted for the consortium, visited the site independently and made a representation to SAIL. Roy said he was disappointed with the situation.
"One cannot work without government support. They could have considered three separate consortiums and accommodated smaller companies like us with 10-25% interest," he said. According to Pradeep Mittal, managing director of Essar Minerals, the group is currently reconsidering its interest and weighing the political risks of doing business in Afghanistan. The six-member consortium bid is likely to build a 3 million-tonne steel plant that SAIL proposes to set up in Afghanistan.
For that, it could also bid for nearby coking coal assets. According to one of the persons directly involved in the preparation of the bid, while some companies have captive iron ore supplies in India, the consortium is trying to balance their needs with firms that have no mines so that such firms can benefit.
SAIL and Tata Steel have comfortable iron ore supplies in India, while JSW buys all its ore. The high quality iron ore in Hajigak is the second significantly large mineral asset that the wartorn country is putting on the block. In 2008, the Aynak copper mines were taken by China Metallurgical Group Corp for nearly $3 billion. Production at Aynak, according to international media reports, has been delayed by five years due to threat of violence.
The uncertainty in the local situation has discouraged foreign players. But Bamiyan is relatively peaceful; say those who have visited the site as guests of Afghanistan mines ministry in January. The locals belong largely to the Sunni Hazara tribe and the province is also home to the country's first and only woman governor. The challenge is mainly in the evacuation of iron ore or finished steel.
"The Indian consortium could offer to pay a part of the cost of rail linkages proposed by Asian Development Bank," said another consortium member. As part of their bid agreement, the China Metallurgical Group was to connect Hajigak to Mazari-i-sharif as well as with the Pakistan border. There is also the Af-Pak trade route agreement, signed only last week, to look forward to.
Facilitated by the US, it allows a one-way route for goods from Afghanistan to reach India, or Pakistan's Gwadar port on the Persian Gulf. The challenge for iron ore may be a rail gauge mismatch at the border. Once European sanctions are lifted, the new critical Iranian port of Chahhbahar can be considered. The India-built Zaranj-Delaram highway stretch, as part of a $2-billion assistance grant, can be used.
"Its not quid pro quo for assistance for India, but the country does have political capital here," said a senior government official who didn't want to be quoted. The two governments and ministries have very good relations. "All failing, road transport through the 508 km stretch from Hajigak via Wagah to Hazira, in Gujarat will work out to Rs 2,000-2,500 per tonne and that can still be beneficial to steelmakers on the western coast," says Roy of Rashmi Metaliks. (By ET)
NEW DELHI: Tata Steel, JSW and Jindal Steel have joined hands with staterun units SAIL, NMDC and Rashtriya Ispat Nigam to form a consortium that will bid for the Hajigak iron ore deposits in Afghanistan, considered to be the second largest in the world.
Fourteen Indian firms, of the total 22, had been short-listed to bid for the mines estimated to contain about 1.8 billion tonnes in reserve. Nearly as many firms had met in Delhi last month to discus the formation of the Indian consortium, according to people familiar with the development.
The public sector undertakings will own 60% with the three private steelmakers sharing the remaining equity. Seshagiri Rao, a joint managing director of JSW Steel , a key member of the consortium, confirmed the development. He, however, declined to comment on the equity stakes that was still being worked out.
The Hajigak deposits are widely believed to be larger than the conservative estimate of 1.8 billion tonnes made by Russian experts during their occupation of Afghanistan in early eighties. The mine has been broken into four independent blocks that is scheduled to be opened for bidding on August 3.
But some of the smaller firms are not convinced about the progress of the bid. Ramanuj Dutta Roy, a vice-president at Rashmi Metaliks, one of the companies shortlisted for the consortium, visited the site independently and made a representation to SAIL. Roy said he was disappointed with the situation.
"One cannot work without government support. They could have considered three separate consortiums and accommodated smaller companies like us with 10-25% interest," he said. According to Pradeep Mittal, managing director of Essar Minerals, the group is currently reconsidering its interest and weighing the political risks of doing business in Afghanistan. The six-member consortium bid is likely to build a 3 million-tonne steel plant that SAIL proposes to set up in Afghanistan.
For that, it could also bid for nearby coking coal assets. According to one of the persons directly involved in the preparation of the bid, while some companies have captive iron ore supplies in India, the consortium is trying to balance their needs with firms that have no mines so that such firms can benefit.
SAIL and Tata Steel have comfortable iron ore supplies in India, while JSW buys all its ore. The high quality iron ore in Hajigak is the second significantly large mineral asset that the wartorn country is putting on the block. In 2008, the Aynak copper mines were taken by China Metallurgical Group Corp for nearly $3 billion. Production at Aynak, according to international media reports, has been delayed by five years due to threat of violence.
The uncertainty in the local situation has discouraged foreign players. But Bamiyan is relatively peaceful; say those who have visited the site as guests of Afghanistan mines ministry in January. The locals belong largely to the Sunni Hazara tribe and the province is also home to the country's first and only woman governor. The challenge is mainly in the evacuation of iron ore or finished steel.
"The Indian consortium could offer to pay a part of the cost of rail linkages proposed by Asian Development Bank," said another consortium member. As part of their bid agreement, the China Metallurgical Group was to connect Hajigak to Mazari-i-sharif as well as with the Pakistan border. There is also the Af-Pak trade route agreement, signed only last week, to look forward to.
Facilitated by the US, it allows a one-way route for goods from Afghanistan to reach India, or Pakistan's Gwadar port on the Persian Gulf. The challenge for iron ore may be a rail gauge mismatch at the border. Once European sanctions are lifted, the new critical Iranian port of Chahhbahar can be considered. The India-built Zaranj-Delaram highway stretch, as part of a $2-billion assistance grant, can be used.
"Its not quid pro quo for assistance for India, but the country does have political capital here," said a senior government official who didn't want to be quoted. The two governments and ministries have very good relations. "All failing, road transport through the 508 km stretch from Hajigak via Wagah to Hazira, in Gujarat will work out to Rs 2,000-2,500 per tonne and that can still be beneficial to steelmakers on the western coast," says Roy of Rashmi Metaliks. (By ET)
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