Indian consortium hoping to be preferred bidder

Thursday, 08 Sep 2011

The bid submitted by a consortium of Indian steel and mining companies, led by Steel Authority of India Limited, for mining concessions of the Hajigak Iron Ore Mines located near Bamiyan in Afghanistan is among the six bids opened by the ministry of mines of Islamic Republic of Afghanistan.

Structure of Indian consortium
SAIL - 20%
NMDC - 18%
RINL - 18%
JSW - 16%
JSPL - 16%
JSW Ispat - 8%
Monnet Ispat & Energy - 4%

The consortium has bid for all the four blocks at Hajigak offered by MoM, Afghanistan. Announcement of preferred and reserved bidders is expected to be made by Afghanistan on or about October 4th 2011.

As per the Request for Proposal issued by MoM, Afghanistan there will be total and annual exploration expenditure requirements over at least a three year period with annual minimums of USD 5 million or more. Bids will be evaluated on various parameters related to bidding company's credentials and benefits accruing to Afghanistan such as royalty, commitment towards corporate social responsibility, etc. Emphasis has been laid on development plans which proposes expansion from iron mine/processing facilities with transport assets to vertically integrated processes including making steel. However, the weightage assigned to individual parameters has not been disclosed by the MoM, Afghanistan.

Upon receiving the news of bid opening, Mr CS Verma chairman of SAIL said that "This is the first time that Indian public and private sector companies have come together to jointly bid for an iron ore asset abroad. With Afghanistan holding strategic interest for India, we hope that our endeavor to obtain mining licenses there will be a stepping stone towards the larger objective of contributing to the much-needed economic growth of the country. This will pave the way for more such collaborative efforts in the future by Indian companies for obtaining raw material assets in other countries."

The five other bids submitted by parties from various countries for the include ACATAC, LLC of the USA (3 blocks), Behin-Sanate Diba of Iran (4 blocks), Gol-e-Gohar Iron Ore of Iran (1 block), Kilo Goldmines Ltd. of Canada (1 block) and Corporate Ispat Alloys Ltd of India (1 block).

Indian iron ore mining mess - Probe uses satellite images

Thursday, 08 Sep 2011

The CBI took recourse to satellite imagery to trace huge amounts of iron ore stacked illegally around Obulapuram Mining Company.

While OMC promoters claimed they had been excavated from the Obulapuram mines, investigators discovered that most stocks found there had been transported illegally from mines dotting the Karnataka to Andhra Pradesh border.

The satellite images, a CBI source claimed, nailed the lie of the OMC promoters. The source said that "It was clear that iron ore from other mines had been carted to Obulapuram mines and shown as an OMC product.”

While Obulapuram mines are located in Andhra Pradesh's Ananpur district, OMC's head office is located in neighboring Bellary, which falls in Karnataka. Besides Janardhana Reddy, his brothers Karunakara and Somsekhara are the co promoters of OMC.

CBI, along with the Survey of India, had earlier this year been asked by the Supreme Court to undertake a survey of the iron-ore mines leased to the Reddy brothers in Anantpur district. As part of the survey, the two agencies are learnt to have taken recourse to satellite imagery.

The Reddys are accused of mining far beyond the 25.9 hectares their company was allowed. CBI alleges the Reddys dug deep into the Bellary Reserve forest area, which includes portions of both Anantpur district of Andhra Pradesh and Bellary in Karnataka.

Mr Janardhana and his brother in law Mr Sreenivas Reddy the managing director of Bellary Mining Corporation, were on Monday arrested by CBI for illegal mining by OMC. They have been remanded to judicial custody.

(Sourced from ET)

ArcelorMittal slashes workforce at Brazil mill

Thursday, 08 September 2011

Brazilian newspaper O Estado de S. Paulo reported Wednesday that ArcelorMittal has dismissed 45 workers from its longs mill ArcelorMittal Acos Longos in Juiz de Fora in the Brazilian state of Minas Gerais, essentially cutting 5 percent of the workforce.

Reduced demand for domestically-produced steel in Brazil driven by high foreign steel imports has been cited as the main reason for the cutback.

The workforce reduction in Brazil follows the temporary shut down the blast furnace at its plant in Eisenhüttenstadt, Germany, due to recently slow demand.

Tags: longs , Germany , Brazil , Europe , South America , ArcelorMittal , production , steelmaking , European Union

India's GVK bid for Australia's Hancock delayed over valuation-sources

Thu Sep 8, 2011

SYDNEY/MUMBAI, Sept 8 (Reuters) - Efforts to finalise a $2 billion-plus bid by India's GVK Power & Infrastructure for two Australian coal mines owned by Hancock Prospecting have been delayed due to differences over valuation, sources familiar with the situation said on Thursday.

GVK had been due to announce the long-awaited deal this week but Hancock's owner, Gina Rinehart, had sought last-minute changes to the agreement, one of the sources told Reuters.

GVK's negotiations to buy the Alpha Coal and Kevin's Corner mines began in February. Deadlines for exclusive talks between the two sides have been extended repeatedly throughout the year, according to other sources.

Finalising the deal had been delayed mainly due to "some valuation issues", one of the sources told Reuters.

A second source said there was no indication how long it would take to resolve the latest differences or whether they might lead to the deal's collapse.

Hancock and GVK did not immediately respond to calls for comment.

India's Economic Times said last month GVK planned to pay $2.2 billion for the mines. As part of the deal the company would pay $900 million to develop transport infrastructure to carry the coal to the port, the newspaper said.

A $1.2 billion loan would be provided by banks to back the bid, banking sources told Thomson Reuters' Basis Point.

The banks include ICICI Bank , Axis Bank , Bank of Baroda and Bank of India. Standard Chartered had dropped out of financing of the deal, sources said.

India holds 10 percent of the world's coal reserves, but local supplies are falling short of demand as the country builds more power plants, and as domestic coal projects run into environmental and land acquisition delays.

Indian energy firms have been scouting for coal assets overseas to feed power plants at home, and have been raising funds for potential overseas acquisitions and expanding facilities.

Indonesia Medco to start coal output for China demand

Thursday, 08 Sep 2011

Reuters reported that Indonesia largest listed oil firm, Medco Energi will start to produce coal this year aiming for 500,000 tonnes of output by end-2011 to ship to China.

Mr Arie Prabowo Ariotedjo head of its mining unit said "This will be our first coal production project. We are selling it to China through a European trader, adding that its field at Nunukan in Eastern Kalimantan province will start production in three months.”

He said that the firm aims to lift production to 1 million tonnes a year by 2014. Coal output in Indonesia, the world top exporter of thermal coal is estimated to grow at least 10% annually over the next five years with industry groups expecting production to reach 340 million tonnes this year.

The mine at Nunukan is on a 6,500-hectares site and has proven source of 8 million tonnes of coal. Medco is also looking to acquire other coal sources and is ready to inject USD 18 million for the first phase of production.

Medco whose main energy activity centres on oil and gas will join the ranks of Indonesian coal firms such as Asia top thermal coal Bumi Resources which expects to produce 66 million tonnes of coal this year.

(Sourced from Reuters)

Petrosea adds US$730 million contract

Thursday, 08 September 11

Coal mining contractor PT Petrosea Tbk (PTRO), a majority owned subsidiary of energy integrated company PT Indika Energy Tbk (INDY), has secured a US$730 million additional coal mining contracting from PT Adimitra Baratama Nusantara from initial contract of US$200 million, according to Insider Stories.

Petrosea, in an official statement to Indonesia Stock Exchange, said the additional contract has been signed by Petrosea on August 25 2011, renewing the previous agreement signed on August 19 2009 and January 18 2011. Under the additional contract, Petrosea is obliged to produce 14 million tons coal and 126 million bcm at Sanga-Sanga, East Kalimantan.

Adimitra Nusantara has guaranteed at least 5-year contract to make Petrosea optimizes new heavy equipments, which is in line with higher production.

Petrosea is 99.39% controlled by Indika Energy, a company that is owned by two stellar businessmen Agus Lasmono Sudwikatmono and Wiwoho Basuki Tjokronegoro.

By end of June 2011, 86.29% of Petrosea consolidated revenue were contributed by coal mining or worth US$96.99 million, services of US$8.25 million, and engineering and construction of US$6.13 million.

Petrosea booked US$112.39 million revenue in the first half of this year, a 26.58% increase from US$88.79 million a year earlier. Adimitra Nusantara contributed US$28 million revenue to Petrosea.

(sourced Insider Stories)

Afghanistan’s Hajigak Iron Ore Deposit Draws Bids From India, Iran, Canada

Wed, Sep 7,2011
By Eltaf Najafizada and James Rupert

Afghanistan’s richest iron-ore deposit drew bids from an Indian government-backed group, two Iranian contenders and Canada’s Kilo Goldmines Ltd. (KGL), an Afghan official said.

Afghanistan’s mines ministry opened the bids yesterday for the estimated 1.8 billion metric tons of ore at Hajigak, 100 kilometers (60 miles) west of Kabul, said Abdul Jalil Jumriany, a ministry director-general. The tender is the biggest on offer in a country that the U.S. government estimated last year holds $1 trillion in untapped minerals.

Seven Indian steel and mining companies, led by state-owned Steel Authority of India Ltd. (SAIL) and NMDC Ltd. (NMDC), offered a bid that is part of an effort by Prime Minister Manmohan Singh’s government for a bigger role in a nearby country whose stability it calls essential.

In neighboring Pakistan, the politically powerful army “would have concerns about India having such a new role” in Afghanistan, said Bashir Ahmed, a senior fellow and retired army brigadier at the Institute of Regional Studies in Islamabad.

“Many in the Pakistani establishment are quite sensitive to India’s presence in Afghanistan,” seeing it as a security threat, he said.

The Indian group includes state-owned Rashtriya Ispat Nigam Ltd., and private-sector companies JSW Steel Ltd. (JSTL), Jindal Steel & Power Ltd. (JSP), Monnet Ispat Ltd. and JSW Ispat Steel Ltd. A separate Indian contender is Corporate Ispat Alloys Ltd., said Jumriany in a text message listing the bidders.
Iranian Interest

Two Iranian bidders are Gol-e-Gohar Iron Ore Co., one of Iran’s biggest iron ore producers, and Behin Sanate Diba Co., a privately run group of 10 investment, mining and industrial companies, some of which are partly state-owned, said Leyla Rashno, the group’s director for tenders.

Rashno declined in a phone interview in Tehran to say whether the group’s bid has been encouraged or backed by Iran’s government.

Toronto-based Kilo Goldmines, which trades on Canada’s TSX Venture Exchange, focuses mainly on gold mining in the Democratic Republic of Congo.

The other bidder for Hajigak is Acatco LLC, whose owner, Afghan-American businessman Nasir Shansab, lives near Washington and said in a phone interview his partnership, which employs 30 people, would bring in unnamed additional partners to develop the mine.
Indian Strategy

Indian authorities decided to facilitate their country’s group because “it makes business and strategic sense to have a presence in mining in Afghanistan,” Indian Mines Secretary S. Vijay Kumar said in January. Hajigak also may offer India an investment foothold in Afghanistan to rival that of state-owned Metallurgical Corp. of China Ltd., which is developing the country’s biggest copper deposit, at Aynak.

India and Afghanistan accused Pakistan’s army of secretly backing the July 2008 Taliban bomb attack on India’s embassy in Kabul, one of at least three deadly attacks on Indians in the city since that time. Pakistan denied the accusation.
Stalled Parliament

The mines ministry will this month recommend one bid to receive the license, plus one alternate, or reserve, bid, for each of four blocks at Hajigak, a ministry statement said. Ministry spokesman Jawad Omar said the awards will require approval by the cabinet and by Afghanistan’s parliament, where sessions have been stalled by a dispute over which candidates should be seated following disputed elections a year ago.

Hajigak is a range of treeless mountain ridges with a thin population of villagers who graze animals and farm the valleys below. The costs of developing mines will be increased by the need to build paved roads or rail lines to connect the site to potential markets.

While the ultimate cost of mining Hajigak is unclear, Indian companies “should have every reason to go for the Hajigak mines” if the cost of acquisition is about $1 to $1.5 per ton, said Ravindra Deshpande, an analyst with Mumbai-based Elara Securities Ltd.

While the bidders do not include the world’s biggest mining groups, which President Hamid Karzai’s government had hoped to attract, the six contenders represent progress in attracting investors’ interest. Afghanistan canceled a previous tender last year when only one of seven initial competitors showed up to visit the Hajigak site.
Corruption Issue

The U.S. Defense Department has backed efforts to draw in international investors that it says are essential to stabilizing Afghanistan. Still, the decade-old war and corruption remain obstacles. Afghanistan last year tied with Myanmar for the second-worst ranking among 178 countries in Transparency International’s perceived corruption index.

Karzai’s government has pledged to manage and publish its mining contracts under the provisions of the Extractive Industries Transparency Initiative, or EITI, a voluntary anti- corruption regime, Mines Minister Wahidullah Shahrani has said.

EITI, based in Oslo, Norway, advocates rules for improving the transparency of contracts and payments in mining and oil and gas extraction. The group rates 11 countries, including Nigeria, Norway, Liberia and Azerbaijan, as fully compliant, while 23 states, including Afghanistan, Kazakhstan and Indonesia, are pursuing the two-year process to achieve that status.

(sourced Bloomberg)

Tata Power trips on Mundra

September 7, 2011
By Priya Kansara Pandya, BS

Mumbai: Higher coal realisations or a meaningful rise in output from Indonesian mines could help partly offset the increase in costs for the Mundra UMPP.

Tata Power touched a 52-week low of Rs 995.2 on September 5, amid growing concerns about the impact of higher imported coal costs on its flagship Ultra Mega Power Project (UMPP) at Mundra in Gujarat’s Kutch district, after the change in mining laws by the Indonesian government. And, recent reports suggest the Gujarat government, which had signed to buy about 2,000 Mw from there, is not in a mood to pay the higher costs. Although the company is speaking to the Union government for a rate increase (as is Reliance Power for its UMPP in Andhra Pradesh), as well as planning other measures to mitigate the impact, the Street is not impressed.

According to analysts, the Mundra UMPP is expected to incur losses, given the current rate structure and new higher costs. However, part of the costs will be compensated by higher coal realisations, due to its stake in Indonesian coal mines. In this backdrop, analysts are cautious in the medium term, despite an 18 per cent correction witnessed last month. Some have even downgraded their price targets and ratings.

New rules
The Indonesian government recently implemented the Indonesian Coal Price Regulation, which requires prices for all transactions to be benchmarked against a set of international and domestic indices and all sale contracts to be modified retrospectively by September.

Mundra (capacity of 4,000 Mw), India’s first UMPP, is expected to be fully commissioned by 2012-13 (two units of 800 Mw each are expected to be commissioned by March 2012). It was awarded to Tata Power through competitive bidding, on a rate of Rs 2.26 per unit. It has a 10.11-million tonne annual coal supply contract with its Indonesian coal companies (30 per cent stake each in KPC and Arutmin), part of which would be used in Mundra UMPP. In the original coal supply contract, Mundra UMPP was to get 75 per cent of the coal at index-linked prices, while the balance 25 per cent was to be supplied at a lower price (about $40 per tonne), fixed for five years. After five years, the entire quantity would come at market prices.

With the change in mining policy, the fuel costs are expected to rise by about $30-40 per tonne and, hence, the project is estimated to incur losses if the company is unable to pass on the higher costs. Analysts peg the gross impact of this move on Mundra’s profitability at about $500 million over five years.

Meanwhile, the management has presented its case to the Indonesian government and has also asked the Union power ministry here to discuss the higher cost of coal with state electricity boards (SEBs). Analysts say the government is unlikely to intervene, as other private players would then ask for the same treatment. While the company is also looking at options such as blending cheaper low-calorific coal to rationalise the cost, the move could impact efficiency of the plant, say analysts.

However, all is not over for the company. Losses at Mundra would also be mitigated through better financial performance of the coal business, thanks to higher coal realisations. The net impact on the combined valuation of Mundra and the mines is around five per cent.

Australia's Port Hedland shipments up 15.3 pct in August vs July

Sept7,2011

SYDNEY (Reuters) - Iron ore shipments from Australia's Port Hedland, one of the world's largest export terminals, jumped 15.3 percent to 20.22 million tonnes in August from July, data released by the port authority showed on Tuesday.

Shipments to China, the port's biggest destination, rose to 14.3 million tonnes from 12.62 million in July.

Billiton is the port's biggest user followed by Fortescue Metals Group Ltd .

S.Africa's miners may strike against Xstrata

Sep7, 2011

JOHANNESBURG (Reuters) - South Africa's National Union of Mineworkers (NUM) said on Tuesday it had referred its dispute with coal producer Xstrata over an employee share ownership programme to arbitration and may strike if the talks fail.

"The NUM and Solidarity (trade union) have agreed to take the matter to (arbitration), paving the way for a possible massive strike action against the company," Eddie Majadibodu, NUM 's Chief Negotiator at Xstrata, said in a statement.

The unions are opposing the company's stand that employees should benefit from the share ownership programme according to their grades.

(sourced Thomson Reuters)

Vale open to sell or lease its large iron ore vessels - Report

Wednesday, 07 Sep 2011

Dow Jones reported that Brazilian iron ore miner Vale SA is open to selling or leasing on a long term basis the ownership of its very large ore carriers as it doesn't intend to be a major freight operator.

Vale currently has 34 vessels under constructions, 16 of which are being built by international shipowners and will be operated exclusively for the company under long term contracts.

The remaining 18 ships, which are being built in South Korean and Chinese shipyards, may be transferred or leased to international shipowners, including the Chinese.

A Rio de Janeiro based press officer for Vale said that "Our goal is to encourage the construction of vessels which are more efficient, with higher standards of operational safety, environmentally friendly these vessels allow for a reduction of 35% in carbon emissions per transported tonne and contribute to reduce the freight volatility in the market."

(sourced from Dow Jones Newswires)

BHPB approves 11 major projects in 2011

Wednesday, 07 Sep 2011

BHP Billiton approved 11 major projects for a total investment commitment of USD 12.9 billion during the 2011 financial year. Following the progression of the Jansen Potash Project into feasibility during the March 2011 quarter, BHP Billiton also announced an additional USD 488 million of pre-commitment funding to support development of the project in Saskatchewan, Canada.

The progression of these projects forms a meaningful component of the Group’s anticipated organic growth program that is expected to exceed USD 80 billion over the five years to the end of the 2015 financial year.

Industry wide cost pressures remain a feature of the development landscape and reflect stronger producer currencies as well as underlying inflation on raw material and labour costs. BHP Billiton approved revised capital budgets and schedules during the 2011 financial year for the Esso Australia Resources Pty Ltd operated Kipper (USD 900 million, BHP Billiton share) and Turrum (USD 1.4 billion, BHP Billiton share) Petroleum projects and the BHP Billiton operated Worsley Efficiency and Growth (USD 3.0 billion, BHP Billiton share) alumina refinery expansion (all Australia).

Three major projects delivered first production in the twelve month period: namely the New South Wales Energy Coal MAC20 Project, the Douglas Middelburg Optimisation Project in South Africa Coal and Angostura Gas Phase II (Trinidad and Tobago).

Iron ore and oil prices set to dip in 2012 - Westpac

Wednesday, 07 Sep 2011

Mr Bill Evans China chief economist of Westpac said that iron ore prices are set to dip next year after unprecedented stockpiling of the steel making commodity. He also said the oil price could fall because of weaker global growth.

Mr Evans said the iron ore price was higher than he would have expected, given that the brakes were being put on China's investment property boom after a dangerous surge in residential construction to levels almost double that of underlying demand.

Mr Evans told the RIU Good Oil conference in Fremantle, Western Australia said that "The area where you would have expected to see the greatest slow down would be in the iron ore price and that's as strong as ten men ... but I'm saying I would expect prices to start to turn down. I suspect there's a degree of stockpiling at the moment. Inventories are very high, the highest they've ever been. That can easily turn."

Mr Evans said that China would take a breather with iron ore purchases in the next 12 months but that its appetite would return as the Asian superpower continued its unprecedented industrialization, provided authorities staved off a return to high inflation.
He said that "They've been unsuccessful so far in containing inflation pressures, so there's this balancing act about wanting to increase housing affordability. So (the government is also) discouraging the investment bubble in housing as well as wanting to contain inflation pressures, and balance that off against maintaining decent growth momentum.”

Mr Evans said the long term oil price would likely rise to USD 100 a barrel from about USD 83 a barrel currently as industrial production in OECD countries fell.

He was more skeptical about the short term outlook for oil saying global growth the critical factor driving the oil price would fall below trend next year at 3.5%.

(Sourced from AAP)

India's SAIL-led consortium bids for Afghan iron mines

Sept7,2011

MUMBAI (Reuters) - A consortium of Indian steel and mining firms led by the Steel Authority of India Limited (SAIL) has bid for four blocks of mines in Afghanistan, SAIL said in a statement on Tuesday, proposing to set up a steel plant in the country.

The Hajigak mines, which are estimated to have a reserve of 1.8 billion tonnes of magnetite with 62-63 percent iron content, have attracted five other bids targeting various numbers of blocks, the statement said.

The announcement of preferred and reserved bidders is expected around Oct. 4, the statement added.

(sourced Reuters)

Macarthur Coal still hoping for rival to Peabody Energy ArcelorMittal bid - Report

Wednesday, 07 Sep 2011

The Australian reported that Macarthur Coal's board is still hoping for a higher takeover bid, despite reaffirming its recommendation of the sweetened offer of Peabody Energy and ArcelorMittal.

Mr Keith De Lacy chairman of Macarthur Coal said that "As previously advised, Macarthur had pursued discussions with third parties, which had expressed interest in putting forward a superior proposal for Macarthur's shares. The directors advise that as at today, no superior proposal has been received. Although it remains possible that a superior proposal might be made, there can be no assurances that any will emerge."

Macarthur also noted that Mr Zeng had made no recommendation or statement about the intentions of Citic Group on the takeover bid. The deal with PEAM Coal, a 60:40 JV between Peabody and ArcelorMittal, has a no shop, no talk condition, but the target's recommendation assumes the absence of a higher bid.

Macarthur also used the target statement to warn shareholders of ongoing uncertainty about the regulatory environment it operated in. It said the mining and carbon tax and land access issues could reduce profitability.

Mr De Lacy said that "By accepting the PEAM offer, Macarthur shareholders are able to crystallize cash value for their shares and remove any ongoing exposure to market, regulatory and other risks that Macarthur Coal may face in the future, assuming that the PEAM offer becomes unconditional."

Many believed a rival offer for Macarthur was likely, with 25% shareholder Citic Group the key to any alternative bid. But with no firm deal apparent, the target's board accepted Peabody and ArcelorMittal's increased price.

The USD 4.9 billion, USD 16 a share bid had been raised from the USD 15.50 offer launched on August 1st 2011.

(sourced from TheAustralian)