Aditya Birla group has pulled out of the race to acquire Australia's Northern Iron Ltd, citing variability in production at Sydvaranger iron project of the firm and its impact on costs.
"On November 3, 2012, Essel Mining advised NFE that following its stage two detailed due diligence investigations, it was not in a position to submit a stage two proposal at this time," Northern Iron (NFE) has said in a filing to the Australian Securities Exchange.
Essel Mining, an unlisted subsidiary of the Kumar Mangalam Birla-led group, had sweetened its bid in July by about 8.53% to AUD 1.40 per share (valuing NFE at AUD 518 million). Its first offer had failed to impress the Board of Australian mining firm.
Following the revised offer, Northern Iron had allowed Essel Mining to conduct stage two due diligence of its assets, and last month it had extended the time line for putting up a final bid to early-November.
"Essel Mining stated that the reason for their decision in related to the continued variability in production at the Sydvaranger project and the resultant impact on costs," NFE said.
Interestingly, Swiss trading firm Promnivest AG, which had topped the Essel's offer with a counter bid of AUD 525 million, has also exited from the process of acquiring NFE.
The Australian firm, which has a long term supply agreement with Tata Steel Europe, also said that it has decided to close the stake sale process.
NFE's Sydvaranger iron ore project is in northern Norway with more than 25 years of mine life. It consists of four magnetite iron deposits and 20 other deposits. Overall, the Australian firm has a production capacity of around 2.1 million tonne per year.
Talking about the project, NFE said that its production was negatively impacted by two reasons in the last quarter and it has rectified them.
Besides, it is aiming to bring down its cash operating cost to $70-76 per tonne in the current quarter, from July-September quarter's USD 83 per tonne levels.
Essel Mining and Industries was set up in 1950 and is amongst India's largest iron ore mining companies. The company has iron ore mines in mineral-rich Barbil-Barajamda belt of Odisha.
