RINL plans captive coal, iron ore mines

After announcing a 7 million tonne capacity expansion plan, Rashtriya Ispat Nigam (RINL) is now looking at backward integration. The company has drawn up a plan which envisages captive resources for iron and coal.

RINL is planning to enter into strategic alliances for coal mines in Australia, along with acquiring leases for iron ore mines in Orissa and Chattisgarh.

B K Panda, chairman & managing director, RINL, said, "We lack captive resources for iron and coal and are currently in talks with the Orissa and Chattisgarh government for iron ore mine leases. We are also planning to form joint ventures or enter into equity partnerships for 2-3 coal mines in Australia."

The company is eyeing iron ore deposits of 500 million tonne, he added.

The investment for developing iron ore mines is expected to be around Rs 600 crore, while the company will invest around Rs 400 crore for coal mines.

"The total investment for coal and iron ore is in the region of Rs 1,000 crore. We have a healthy cash flow position currently, but if we require funds, we will go for debt," Panda said.

The company currently has a free cash flow of Rs 1,500 crore and a debt free portfolio.

Meanwhile, the first phase of RINL's expansion plan is set to take off by 2005. The company is targeting a capacity of 5 million tonne by 2007-08, which will be enhanced to 6.2 million tonne by 2010 in the second phase.

The company is looking at a capacity of 10.28 million tonne by 2012. Around 75 per cent of the enhanced capacity will be for long products, while the balance will be for flats as well as value-added products.

The total investment for these expansion projects is estimated over Rs 18,000 crore. "We will be funding the first phase of expansion completely through internal accruals. However, if required, we could go in for some debt during the second and third phases."

Investment for the first phase is around Rs 2,500 crore, while the second phases entails an investment of Rs 6,000 crore. In the third phase, the company will invest around Rs 9,000 crore, Panda said.

RINL is also looking at savings of around Rs 100 crore annually, through replacement of coal by gas. The company is planning to enter into a memorandum of understanding with natural gas suppliers.