Tata Steel to buy stake in overseas coal mine

Tata Steel is likely to complete acquisition of a minority stake in an overseas coal mine by the end of the current calendar year, said A D Baijal, vice-president (raw materials), on Tuesday. The company is also looking at buying more steel plants abroad, he said.

"We are looking to pick up a minority stake in a new development with large offtake," he said.

The company is currently looking at Australia in particular for the acquisition, although buyouts in other countries are not ruled out, Baijal said.

If the deal goes through, it would be the second overseas coal mine acquisition for the company.

In 2005-06, the company bought a 5 per cent interest in Carborough Downs Coal Project in Queensland, Australia. The company has an offtake agreement in lieu of its stake in the project, which allows it to source coal supplies.

Baijal said production from the undeveloped Carborough mine would commence by March quarter. Tata Steel will utilise its share of coal supplies from the project to meet the needs of its steel plant in India.

Coking coal, an essential ingredient in steel making process, is in short supply in India forcing most steel makers to import the raw material.

Initially, the project will give Tata Steel about 100,000 tonne of coal which could go up to 0.7 million tonne once fully ramped up.

A large part of India's coking coal supplies are imported from Australia and Indonesia. Although Tata Steel has its own captive coal mines in Jharkhand, it still has to import a significant portion for its use.

Baijal said Tata Steel is planning to contain imported coal requirements at 30-35 per cent of its total annual demand although in absolute terms it may consume more imported coal as it expands in India and abroad.

Its current annual demand for coking coal is at 4.5-5 million tonne, a third of which is imported. In the last two years, the company has lowered dependence on imported coal from 40-45 per cent, Baijal said.

Tata Steel is also on the look out for acquiring iron ore resources, he said, adding standalone mineral resources were hard to acquire.

The company does not have any overseas iron ore mines as of now. Baijal said the company is "continuously looking" to acquire steel plants abroad. It has already acquired two plants in the last two years, one each in Singapore and Thailand.

He said the company would either completely acquire or buy a majority stake in the overseas steel plant.