Thu Dec 15, 2011
PRETORIA (Reuters) - A South African judge ruled on Thursday that a company with no mining experience and business links with President Jacob Zuma's son could not keep mineral prospecting rights it was awarded.
South Africa previously awarded Imperial Crown Trading the right to prospect for minerals at the Sishen mine operated by Kumba Iron Ore, a unit of global miner Anglo American.
The stakes went far beyond one commercial dispute.
ArcelorMittal South Africa had allowed the right to lapse in 2009, putting in jeopardy a lucrative multi-billion rand supply deal it had with Sishen that allowed it to source iron ore at a discount.
Judge Raymond Zondo also said he agreed with ArcelorMittal's contention that Sishen held 100 percent of the right to the operation and it was not open for anyone to apply for the lapsed right.
ArcelorMittal says this means its supply agreement remains in force.
"The judgement of the High Court serves to confirm our view that Sishen remains obliged to supply 6.25 metric million tonnes of iron ore to us at cost plus three percent in terms of our agreement," ArcelorMittal said in statement.
The group's share price rose more than 5 percent after the verdict.
Kumba disagreed that the decision had any bearing on the supply dispute, which is being fought out in a separate arbitration process.
"Kumba remains convinced that the contract lapsed and this judgment does not change that," a spokesperson for Kumba said.
Thursday's judgement was the latest twist in a long and complex saga, and ICT immediately signalled it would appeal.
"Certainly we will appeal. We do not agree with the judgement. It is contrary to what we have been contending all along," ICT lawyer Ronnie Mendelow told journalists after the ruling.
One of ICT's owners has business connections to Zuma's son, Duduzane, and the awarding of the right had rattled investor confidence in Africa's largest economy as it focused unflattering attention on the issue of crony capitalism and political favouritism.
"One of the uncertainties of the mining industry has been the security of tenure, and investment has pulled back, so if anything this judgement may encourage investment," said Chris Hart, economic strategist at Investment Solutions.
"My instinct is that policy and procedures need to follow best practice. My sense is that we are moving back to best practice and a defendable process of awarding mineral rights," he said.
The full judgement with the reasons for the decision will be given on Tuesday, and South Africa's department of mineral resources said in a statement it would not comment before then.
(sourced Reuters)
Showing posts with label iron ore mine. Show all posts
Showing posts with label iron ore mine. Show all posts
Thursday, December 15, 2011
Monday, November 21, 2011
Adani denies involvement
Monday, 21 Nov 2011
Adani Enterprises said that it has no iron ore mine in Karnataka or anywhere else in the country and its only interest in the mineral is rendering port services to exporters.
An Adani spokesperson said in a statement that "We hereby confirm that Adani Enterprises has no iron ore mine in Karnataka or anywhere else in the country. We do not have any interest in iron ore except rendering port services to exporters/ miners of iron ore.”
The company provides services like storage, handling of various cargo and pay warfage charges to the port authorities. The entire responsibility of approvals relating to mine permits and transportation up to Belakary Port lie with the miner and or exporter.
It added that "Adani Enterprises has rendered such services in compliance of all rules and regulations laid down by the Port and Customs authorities. We would like to reiterate that we have not indulged in any unauthorized activities.”
The company's comments follow the Supreme Court today asking its expert committee to examine alleged illegalities committed by major companies involved in mining activities in Bellary district of Karnataka and neighboring Andhra Pradesh which have been indicted in the Lokayukta report.
An NGO has sought the extension of the CBI probe to cover two companies, including Adani Enterprises, that have been strongly indicted in the Karnataka Lokayukta report for illegal mining of iron and ore.
(Sourced from profit.ndtv.com)
Adani Enterprises said that it has no iron ore mine in Karnataka or anywhere else in the country and its only interest in the mineral is rendering port services to exporters.
An Adani spokesperson said in a statement that "We hereby confirm that Adani Enterprises has no iron ore mine in Karnataka or anywhere else in the country. We do not have any interest in iron ore except rendering port services to exporters/ miners of iron ore.”
The company provides services like storage, handling of various cargo and pay warfage charges to the port authorities. The entire responsibility of approvals relating to mine permits and transportation up to Belakary Port lie with the miner and or exporter.
It added that "Adani Enterprises has rendered such services in compliance of all rules and regulations laid down by the Port and Customs authorities. We would like to reiterate that we have not indulged in any unauthorized activities.”
The company's comments follow the Supreme Court today asking its expert committee to examine alleged illegalities committed by major companies involved in mining activities in Bellary district of Karnataka and neighboring Andhra Pradesh which have been indicted in the Lokayukta report.
An NGO has sought the extension of the CBI probe to cover two companies, including Adani Enterprises, that have been strongly indicted in the Karnataka Lokayukta report for illegal mining of iron and ore.
(Sourced from profit.ndtv.com)
Sunday, November 13, 2011
TISCO’s underground iron ore mining project at Ekou enters design phase
November13, 2011
According to Shanxi Province-based Chinese steelmaker Taiyuan Iron and Steel Co. (TISCO), the project for the switch from open-pit mining to underground mining at its Ekou iron ore mine in Shanxi has entered its design phase. The mine contains 190 million mt of underground iron ore reserves, while the project targets an annual iron ore output capacity of 7.5 million mt.
In September, China-based MCC Northern Engineering & Technology Co. won the tender to carry out the project for the switch to underground mining at TISCO's Ekou mine.
Tags: iron ore , China , Tisco , raw mat , East Asia and Pacific , Far East , Southeast Asia , mining , production
(sourced steelorbis.com)
According to Shanxi Province-based Chinese steelmaker Taiyuan Iron and Steel Co. (TISCO), the project for the switch from open-pit mining to underground mining at its Ekou iron ore mine in Shanxi has entered its design phase. The mine contains 190 million mt of underground iron ore reserves, while the project targets an annual iron ore output capacity of 7.5 million mt.
In September, China-based MCC Northern Engineering & Technology Co. won the tender to carry out the project for the switch to underground mining at TISCO's Ekou mine.
Tags: iron ore , China , Tisco , raw mat , East Asia and Pacific , Far East , Southeast Asia , mining , production
(sourced steelorbis.com)
Monday, October 24, 2011
NMDC to buy four more iron ore assets abroad - Report
Monday, 24 Oct 2011
It is reported that state owned iron ore miner NMDC which had entered into a deal to acquire 50% stake in Australia Legacy Iron Ore last month, is likely to decide on acquiring four more properties overseas by the end of this month.
A source close to the development said "The company board is likely to meet this week to take a final call on these properties. Of these, two properties an iron ore mine and a phosphate mine are in Australia while the third one is an iron ore deposit in Brazil and the fourth a coking coal asset of Russia Vincy Coal.”
The source said "All these are going to be low cost acquisitions, totaling USD 500 million. This would include payment of initial development cost incurred by the holding companies."
Adding that the company board had also met on October 10 to decide on the proposals, the source said that some unanswered issues are likely to decide in the forthcoming board meeting.
The source said the iron ore asset in Australia is certified by the Joint Ore Reserves Committee code of the country and is a large asset, adding that NMDC was looking to acquire a minimum of 50% stake in the asset.
Refusing to name the asset, the source said that it is proposed to be acquired through Legacy Iron Ore which will be used by NMDC as the launching platform in Australia.
(sourced Business-standard)
It is reported that state owned iron ore miner NMDC which had entered into a deal to acquire 50% stake in Australia Legacy Iron Ore last month, is likely to decide on acquiring four more properties overseas by the end of this month.
A source close to the development said "The company board is likely to meet this week to take a final call on these properties. Of these, two properties an iron ore mine and a phosphate mine are in Australia while the third one is an iron ore deposit in Brazil and the fourth a coking coal asset of Russia Vincy Coal.”
The source said "All these are going to be low cost acquisitions, totaling USD 500 million. This would include payment of initial development cost incurred by the holding companies."
Adding that the company board had also met on October 10 to decide on the proposals, the source said that some unanswered issues are likely to decide in the forthcoming board meeting.
The source said the iron ore asset in Australia is certified by the Joint Ore Reserves Committee code of the country and is a large asset, adding that NMDC was looking to acquire a minimum of 50% stake in the asset.
Refusing to name the asset, the source said that it is proposed to be acquired through Legacy Iron Ore which will be used by NMDC as the launching platform in Australia.
(sourced Business-standard)
Tuesday, September 6, 2011
Pellet plants must for captive iron ore mines in Jharkhand
Tuesday, 06 Sep 2011
ET reported that Jharkhand has emerged as the first state to make it mandatory for companies with captive iron ore mines to set up pellet plants to utilize their increasing deposits of iron ore fines.
Availability of surplus iron ore in the state has also prompted the state's industry department to consider providing special incentives for industries to set up pellet plants.
Talking to ET, additional chief secretary (mines and geology) Mr AK Sarkar said it has formulated a policy that all captive iron ore mines will set up pellet plants to ensure the surplus deposit of fines are used in the interest of the state.
He said that "This way the environmentally hazardous fines will be used in the pellet plants and thus check pollution. At the same time, it will generate additional revenue and employment opportunities in the state.”
Mr Sarkar said that "Two companies Steel Authority of India and Usha Martin had been regularly seeking permission to dispose of their huge stocks of iron ore fines. While SAIL has generated a deposit of about 20 million tonnes of fines, Usha Martin has about 2 million tonnes. In view of their repeated requests, the state has decided to give them and all captive mine owners, a one time permission to sell their surplus stocks, but with certain conditions.”
He said that the government's move is likely to attract new investment in pellet plants. The industry secretary said while SAIL's Bokaro unit is in talks with POSCO for starting pelletization, Essar, Sesa Goa and Adhunik group have also shown interest in setting up pellet plants. Many other companies have also shown interest.”
He added that "Pelletization will check pollution and hence is more advantageous for the state.”
The blanket ban on sale of iron ore fines by captive iron ore mines in Jharkhand has resulted in some captive mines gathering huge stocks of fines.
(Sourced from ET)
ET reported that Jharkhand has emerged as the first state to make it mandatory for companies with captive iron ore mines to set up pellet plants to utilize their increasing deposits of iron ore fines.
Availability of surplus iron ore in the state has also prompted the state's industry department to consider providing special incentives for industries to set up pellet plants.
Talking to ET, additional chief secretary (mines and geology) Mr AK Sarkar said it has formulated a policy that all captive iron ore mines will set up pellet plants to ensure the surplus deposit of fines are used in the interest of the state.
He said that "This way the environmentally hazardous fines will be used in the pellet plants and thus check pollution. At the same time, it will generate additional revenue and employment opportunities in the state.”
Mr Sarkar said that "Two companies Steel Authority of India and Usha Martin had been regularly seeking permission to dispose of their huge stocks of iron ore fines. While SAIL has generated a deposit of about 20 million tonnes of fines, Usha Martin has about 2 million tonnes. In view of their repeated requests, the state has decided to give them and all captive mine owners, a one time permission to sell their surplus stocks, but with certain conditions.”
He said that the government's move is likely to attract new investment in pellet plants. The industry secretary said while SAIL's Bokaro unit is in talks with POSCO for starting pelletization, Essar, Sesa Goa and Adhunik group have also shown interest in setting up pellet plants. Many other companies have also shown interest.”
He added that "Pelletization will check pollution and hence is more advantageous for the state.”
The blanket ban on sale of iron ore fines by captive iron ore mines in Jharkhand has resulted in some captive mines gathering huge stocks of fines.
(Sourced from ET)
Friday, August 26, 2011
Northland inks lease agreement with Swedish port
August26,2011
By Matthew Hill
TORONTO – Northland Resources, developing an iron-ore mine in Sweden, said on Thursday it signed a lease agreement with the Scandanavian nation’s Narvik Port, and that it is on track to produce the steelmaking ingredient at the Kaunisvaara by the end of next year.
“We are very pleased that the Narvik authorities have provided the final approval which will allow us to start construction of the new terminal and ancillary infrastructure so that it will be ready for the first shipment of high-grade, high quality iron concentrate from our mines in Kaunisvaara at the beginning of 2013,” Northland CEO Karl-Axel Waplan said.
Work will now begin on a temporary shipping facility, including a quay, a depot, a conveyor belt, a de-icing facility, and an unloading facility for the railcars and railway lines.
The TSX-listed company aims to truck the iron-ore concentrate 150 km from the mine to a railway line that will rail it to the port, but is considering building a rail conection that would cost in the region of $1-billion, Waplan said earlier this year.
Northland has entered into industrial off-take contracts which will last for seven to eight years for Kaunisvaara’s entire five-million ton a year production.
The mine is located in north-eastern Sweden.
The company also announced the names of the three compnies it previously said would handle the transportation of its ore as Savage Service Corporation, Peab and Grieg Logistics.
Savage will carry the overall responsibility for the coordination, management and cooperation between the three parties and coordinate the work program.
(sourced Mining Weekily)
By Matthew Hill
TORONTO – Northland Resources, developing an iron-ore mine in Sweden, said on Thursday it signed a lease agreement with the Scandanavian nation’s Narvik Port, and that it is on track to produce the steelmaking ingredient at the Kaunisvaara by the end of next year.
“We are very pleased that the Narvik authorities have provided the final approval which will allow us to start construction of the new terminal and ancillary infrastructure so that it will be ready for the first shipment of high-grade, high quality iron concentrate from our mines in Kaunisvaara at the beginning of 2013,” Northland CEO Karl-Axel Waplan said.
Work will now begin on a temporary shipping facility, including a quay, a depot, a conveyor belt, a de-icing facility, and an unloading facility for the railcars and railway lines.
The TSX-listed company aims to truck the iron-ore concentrate 150 km from the mine to a railway line that will rail it to the port, but is considering building a rail conection that would cost in the region of $1-billion, Waplan said earlier this year.
Northland has entered into industrial off-take contracts which will last for seven to eight years for Kaunisvaara’s entire five-million ton a year production.
The mine is located in north-eastern Sweden.
The company also announced the names of the three compnies it previously said would handle the transportation of its ore as Savage Service Corporation, Peab and Grieg Logistics.
Savage will carry the overall responsibility for the coordination, management and cooperation between the three parties and coordinate the work program.
(sourced Mining Weekily)
Friday, August 19, 2011
Update on iron ore mining in Kudremukh National Park
Friday, 19 Aug 2011
Mr Beni Prasad Verma minister of steel has said that the government have no proposal so far, to reopen the iron ore mine in the area of Kudremukh National Park. However, a part of the loose secondary weathered ore lying in the already broken up area, is posing environmental and ecological threat to the surroundings, particularly to river Bhadra.
To protect from the possible ecological damage, the government has filed an IA No. 3087/2011 before the Hon’ble Supreme Court for allowing Kudremukh Iron Ore Cooperation Ltd for removing approximately 20 million tonnes of loose secondary weathered ore without any drill or blasting.
In a written reply in the Rajya Sabha he said that KIOCL Ltd. is not in the possession of any forest land falling in the Kudremukh National Park. Even the part of forest land which was under lease for mining to KIOCL Ltd has been handed over to Forest Department of government of Karnataka in compliance with the order of Hon’ble Supreme Court. Subsequently, government of Karnataka had included an area of 3703.55 ha of forest land into the Kudremukh National Park vide its Gazette Notification dated January 9th 2007
Mr Beni Prasad Verma minister of steel has said that the government have no proposal so far, to reopen the iron ore mine in the area of Kudremukh National Park. However, a part of the loose secondary weathered ore lying in the already broken up area, is posing environmental and ecological threat to the surroundings, particularly to river Bhadra.
To protect from the possible ecological damage, the government has filed an IA No. 3087/2011 before the Hon’ble Supreme Court for allowing Kudremukh Iron Ore Cooperation Ltd for removing approximately 20 million tonnes of loose secondary weathered ore without any drill or blasting.
In a written reply in the Rajya Sabha he said that KIOCL Ltd. is not in the possession of any forest land falling in the Kudremukh National Park. Even the part of forest land which was under lease for mining to KIOCL Ltd has been handed over to Forest Department of government of Karnataka in compliance with the order of Hon’ble Supreme Court. Subsequently, government of Karnataka had included an area of 3703.55 ha of forest land into the Kudremukh National Park vide its Gazette Notification dated January 9th 2007
Friday, March 11, 2011
Vale says Brazil gov't overcharging for royalties
Thu Mar 10, 2011 9:08pm GMT
* Vale seeking legal review of royalty payments
* Gov't source sees Vale owing up to $2.4 bln
(Reporting by Leo Goy in Brasilia and Brian Ellsworth in Rio de Janeiro; Editing by Lisa Shumaker)
* Vale seeking legal review of royalty payments
* Gov't source sees Vale owing up to $2.4 bln
RIO DE JANEIRO, March 10 (Reuters) - Brazilian mining giant Vale (VALE5.SA: Quote) said on Thursday the government is overcharging it for mineral royalties and will seek a legal review of some the requested payments amid a dispute over debts to the government that could reach $2.4 billion.
Vale, the world's largest iron ore miner, insisted it had made payments according to the law and said it disagreed with the government over criteria for calculating what it owed.
Analysts say the dispute, which comes as Brazil mulls an increase in mineral royalties that would boost government revenues from the booming mining business, is unlikely to financially harm the company or hinder its operations.
"Vale believes that the values being charged ... are excessive and should be submitted to (review of) judicial experts," the company said in a statement. "Discussions of the correct interpretation of laws are perfectly legitimate."
The firm said the government agency that collects royalties had in some cases considerably lowered requested payments when the company challenged them.
A source at the Mines and Energy Ministry told Reuters on Thursday that the disputed amount could reach 4 billion reais ($2.4 billion). A second source said that figure was the accumulation of a number of royalty disputes dating back years.
The sources said Mines and Energy Minister Edison Lobao had requested a review of pending mining royalty debts and had met with President Dilma Rousseff about the Vale dispute.
Authorities in the northern state of Para had sought to suspend Vale's license to operate the giant Carajas iron mine over the unpaid royalties, though that decision was quickly overturned by the same agency, Vale said.
Operations at Carajas were not affected, according to a company spokeswoman. Analysts for brokerage Ativa said in a research note on Thursday the dispute was unlikely to affect future operations at Carajas or to be resolved quickly.
The royalties in question relate to minerals extracted in Para, where Carajas is located, and in the state of Minas Gerais in the south east.
Vale, the world's largest iron ore miner, insisted it had made payments according to the law and said it disagreed with the government over criteria for calculating what it owed.
Analysts say the dispute, which comes as Brazil mulls an increase in mineral royalties that would boost government revenues from the booming mining business, is unlikely to financially harm the company or hinder its operations.
"Vale believes that the values being charged ... are excessive and should be submitted to (review of) judicial experts," the company said in a statement. "Discussions of the correct interpretation of laws are perfectly legitimate."
The firm said the government agency that collects royalties had in some cases considerably lowered requested payments when the company challenged them.
A source at the Mines and Energy Ministry told Reuters on Thursday that the disputed amount could reach 4 billion reais ($2.4 billion). A second source said that figure was the accumulation of a number of royalty disputes dating back years.
The sources said Mines and Energy Minister Edison Lobao had requested a review of pending mining royalty debts and had met with President Dilma Rousseff about the Vale dispute.
Authorities in the northern state of Para had sought to suspend Vale's license to operate the giant Carajas iron mine over the unpaid royalties, though that decision was quickly overturned by the same agency, Vale said.
Operations at Carajas were not affected, according to a company spokeswoman. Analysts for brokerage Ativa said in a research note on Thursday the dispute was unlikely to affect future operations at Carajas or to be resolved quickly.
The royalties in question relate to minerals extracted in Para, where Carajas is located, and in the state of Minas Gerais in the south east.
(Reporting by Leo Goy in Brasilia and Brian Ellsworth in Rio de Janeiro; Editing by Lisa Shumaker)
Monday, February 28, 2011
Emami Ltd close to taking control of iron ore mining in Orissa
By Aniek Paul, Mint, New Delhi
Feb23, 2011
Diversified conglomerate Emami Ltd is close to taking control of an unexploited iron ore mine in Orissa for '400-500 crore in staggered cash payments.
A memorandum of understanding has been signed between Emami and the company that owns the lease right to the mine and the deal could be concluded within two weeks, according to people familiar with the deal.
Emami's co-chairman R.S. Goenka said the company was scouting for iron ore reserves in Orissa and collieries in Indonesia. Emami may consider diversifying into steel if it could secure iron ore mines. It has already decided to launch a power plant, for which it is looking to buy collieries producing energy coal in Indonesia, he added.
Emami is following other private miners in "securing iron ore reserves" in states such as Orissa, Jharkhand and Chhattisgarh through "intriguing deals structured to comply" with the restrictions on transfer of mining leases under Indian laws, said a person who has acted as an intermediary in several similar deals in the past couple of years. He did not wish to be identified.
Starting in the 1970s, several people, mostly from the "local landed gentry", were given mining leases in the iron ore-rich states--Orissa, Jharkhand and Chhattisgarh. The assets were leased out to them initially for 20 years, but at the end of the first term, the lease was renewable "automatically" for 20 more years even if the developer hadn't made any effort to extract minerals.
But on completion of 40 years, the state governments are to auction these assets, according to the person cited above. "For those owning the mining leases, the only way to retain them is to develop the mines much before the end of the lease term," he said. "Only if a mine is in operation, the company owning the lease right could request the state government to renew the lease again."
But most of these people do not have the cash to develop the mines on their own, so they approach large companies such as Emami to "capitalize" them, he said. Under Indian laws, companies owning mining leases cannot sell shares or receive funding from others to develop the mines, he said.
Notwithstanding the restrictions aimed at making sure that mining leases couldn't be transferred or mortgaged, lawyers have devised a way to "bring in new beneficiaries without breaking the laws", according to him.
One of the key determinants of valuation is the "number of years left in the (40-year) lease term". Those attracting the best valuations are the ones that have at least 15-20 more years left, he added. "But at least one mine with less than three years left in the lease term is known to have found an investor recently." This is significant because, at times, it takes years to obtain clearance from the ministry of environment and forests to start mining.
Companies such as Emami enter as "long-term buyers" of iron ore, paying an "advance to secure the right" to buy the future production of the mine. In some cases, the company owning the mining lease even stages a contest to determine the highest bidder. On conclusion of the deal, however, the "long-term buyer" effectively gets control of the mine.
Though a substantial amount is normally paid at the time of signing the deal, the payment of the best part of the consideration is "linked to milestones". "This is because, even though the long-term buyer would operate the mine going forward, it is entirely dependent on the company owning the mining lease for securing clearances," he said.
It isn't immediately known--and it may not have been firmed up either--how much Emami is to pay upfront for the mine that it is eyeing. "Talks are at final stages; the details are being discussed now," said another person familiar with Emami's deal, who also did not wish to be named.
There's a considerable amount of risk involved in these deals, said a lawyer familiar with them, speaking on condition of anonymity. "Considering the strict environment laws these days, there's no guarantee that all clearances could be obtained," he said. "All deals need not lead to commercial exploitation of reserves--if the investor has such doubts, it would pay a small amount, say '5 crore, at the time of signing the deal."
Another problem is that of "squatters", he added. During legal due diligence, it's often discovered that the firm owning the mining rights signed a similar agreement with another investor years ago, but has been unable to exploit the mine. "In some cases, the right of that person has to be bought out. But at times, the squatters are so demanding that the deal cannot be closed."
(sourced:livemint)
A memorandum of understanding has been signed between Emami and the company that owns the lease right to the mine and the deal could be concluded within two weeks, according to people familiar with the deal.
Emami's co-chairman R.S. Goenka said the company was scouting for iron ore reserves in Orissa and collieries in Indonesia. Emami may consider diversifying into steel if it could secure iron ore mines. It has already decided to launch a power plant, for which it is looking to buy collieries producing energy coal in Indonesia, he added.
Emami is following other private miners in "securing iron ore reserves" in states such as Orissa, Jharkhand and Chhattisgarh through "intriguing deals structured to comply" with the restrictions on transfer of mining leases under Indian laws, said a person who has acted as an intermediary in several similar deals in the past couple of years. He did not wish to be identified.
Starting in the 1970s, several people, mostly from the "local landed gentry", were given mining leases in the iron ore-rich states--Orissa, Jharkhand and Chhattisgarh. The assets were leased out to them initially for 20 years, but at the end of the first term, the lease was renewable "automatically" for 20 more years even if the developer hadn't made any effort to extract minerals.
But on completion of 40 years, the state governments are to auction these assets, according to the person cited above. "For those owning the mining leases, the only way to retain them is to develop the mines much before the end of the lease term," he said. "Only if a mine is in operation, the company owning the lease right could request the state government to renew the lease again."
But most of these people do not have the cash to develop the mines on their own, so they approach large companies such as Emami to "capitalize" them, he said. Under Indian laws, companies owning mining leases cannot sell shares or receive funding from others to develop the mines, he said.
Notwithstanding the restrictions aimed at making sure that mining leases couldn't be transferred or mortgaged, lawyers have devised a way to "bring in new beneficiaries without breaking the laws", according to him.
One of the key determinants of valuation is the "number of years left in the (40-year) lease term". Those attracting the best valuations are the ones that have at least 15-20 more years left, he added. "But at least one mine with less than three years left in the lease term is known to have found an investor recently." This is significant because, at times, it takes years to obtain clearance from the ministry of environment and forests to start mining.
Companies such as Emami enter as "long-term buyers" of iron ore, paying an "advance to secure the right" to buy the future production of the mine. In some cases, the company owning the mining lease even stages a contest to determine the highest bidder. On conclusion of the deal, however, the "long-term buyer" effectively gets control of the mine.
Though a substantial amount is normally paid at the time of signing the deal, the payment of the best part of the consideration is "linked to milestones". "This is because, even though the long-term buyer would operate the mine going forward, it is entirely dependent on the company owning the mining lease for securing clearances," he said.
It isn't immediately known--and it may not have been firmed up either--how much Emami is to pay upfront for the mine that it is eyeing. "Talks are at final stages; the details are being discussed now," said another person familiar with Emami's deal, who also did not wish to be named.
There's a considerable amount of risk involved in these deals, said a lawyer familiar with them, speaking on condition of anonymity. "Considering the strict environment laws these days, there's no guarantee that all clearances could be obtained," he said. "All deals need not lead to commercial exploitation of reserves--if the investor has such doubts, it would pay a small amount, say '5 crore, at the time of signing the deal."
Another problem is that of "squatters", he added. During legal due diligence, it's often discovered that the firm owning the mining rights signed a similar agreement with another investor years ago, but has been unable to exploit the mine. "In some cases, the right of that person has to be bought out. But at times, the squatters are so demanding that the deal cannot be closed."
(sourced:livemint)
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