JSW eyes Latin American mine

JSW Steel, the country's fourth-largest producer of the alloy, plans to buy a mine in Latin America in its first overseas iron ore venture.

The mine has more than 500 million tonnes of ore, Managing Director Sajjan Jindal said in a interview in Mumbai on Tuesday. He declined to provide details as talks are in progress.

The mine has enough ore to produce about 313 million tonnes of steel over its life, seven times India's output.

BHP Billiton's bid for the Rio Tinto Group to create a company controlling almost half the Asian iron-ore market has spurred steelmakers to seek their own raw material supplies.

Tata Steel, the world's fifth-biggest steelmaker, said on December 12 that it's spending $1.5 billion on an iron ore mine in Ivory Coast. Ore prices have jumped threefold in the past five years.

"Globally, there's a rush to secure supplies since prices seem to be headed northwards," Sanjay Makhija, vice-president at Mumbai-based Fortune Financial Services, said. "Iron ore is the new gold."

Contract prices for iron ore may jump 50 per cent in 2008, Macquarie Group said last month. Benchmark coal rates rose to a record this year on disruption to supplies from Australia, the world's biggest exporter of the fuel.

That's spawned $238 billion of takeover offers in the mining industry this year, following on $273 billion in 2006, according to Bloomberg data.

In October, Jindal had said it bought a coal mine in Mozambique and would study more purchases of coal and iron ore assets. JSW, which is doubling capacity to 6.8 million tonnes, has two iron ore mines in India with combined reserves of about 110 million tonnes. JSW needs more raw materials to feed three 10-million tonne mills it plans to build by 2020.

"Genuine concern about long term supplies has raised the price of iron ore and coal to absurd levels," A S Firoz, an independent analyst and former chief economist at India's steel ministry, said in an interview earlier. "Every acquisition of an iron ore or coal mine is raising prices."

JSW Steel shares rose by Rs 26, or 2.2 percent, to Rs 1,189.5 in Mumbai trading, bucking the 0.8 per cent decline in the benchmark 30-share Sensex. The company's market value has tripled this year, beating rivals Steel Authority of India and Tata Steel.

The stock may double by June, Makhija said. A 12 per cent gain this year in the rupee, the biggest in at least three decades, has made targets more affordable. Tata Steel and Hindalco Industries, the largest producer of non-ferrous metals, have led a record $39 billion of takeovers by Indian companies completed this year.

Tata bought UK's Corus Group for $12.9 billion in the biggest purchase by an Indian company, while Hindalco paid $3.4 billion for Atlanta-based Novelis.