SAIL, BHP Billiton ink strategic pact

Steel Authority of India (SAIL), the country's largest steel maker, today entered into a strategic alliance with BHP-Billiton, the world's largest mining company, to develop iron ore and coal mines in India and overseas.

The deal will result in an assured long-term supply of coke for SAIL and an iron ore mining opportunity for BHP in India.

A senior company official said, "It is likely that SAIL will pick up a 10-15 per cent stake in some coal mines of BHP-Billiton so that the Indian steel giant has an assured long-term supply." SAIL will also be buying coking coal from BHP to meet its requirements.

The alliance will include investment by BHP in developing iron ore deposits in India jointly with SAIL, where BHP will provide the technology for exploration, mining and ore beneficiation, a spokesperson for SAIL said.

"The iron ore mines would be utilised for captive purpose. SAIL's ore requirement is expected to go up substantially with the company's expansion plan in progress," the spokesperson added.

SAIL imports about nine million tonne of coking coal per annum of its total intake of 13 million tonne per annum. SAIL recently announced a Rs 25,000 crore expansion to increase its capacity to 20 million tonne per annum by 2011-2012.

A steel sector analyst said, "An assured long term supply of coke will insulate SAIL from the volatility in the international iron and steel sector and result in considerable cost savings."

The alliance between the two companies is likely to develop the iron ore deposits at Chiria and Gua in Jharkhand. Chiria, one of the largest iron ore deposits in the country, is owned by SAIL's wholly-owned subsidiary, Indian Iron & Steel Company, which is set to be merged with the parent.

Both the companies will jointly finalise investment plans relating to development of the mines and will undertake detailed studies, including due diligence, review of assets and feasibility studies.

This is BHP's second attempt to foray into the Indian mining sector after a proposal to develop iron ore deposits in Orissa through a joint venture with South Korean steel maker Posco.