By Krishna N Das
NEW DELHI (Reuters) - An Indian group that has agreed to buy Rio Tinto's
Rio Tinto said on Wednesday it would sell the Benga mine and other projects in Tete province it bought via a $4 billion acquisition of Riversdale Mining in 2011 for just $50 million to the group, International Coal Ventures Pvt Ltd (ICVL).
In 2013, Rio Tinto sacked its chief executive and other executives directly involved in the acquisition of Riversdale and wrote off about $3.5 billion of the purchase price, partly owing to a failure to secure a permit to move coal by barge down Mozambique's Zambezi River. [ID:nL6N0Q51X6]
But C.S. Verma, chairman of ICVL that had lost out to Rio Tinto in buying Riversdale, said the venture will be able to profitably bring in coal to India using a "secret recipe".
Also Read
"I will not be able to tell you what the recipe is but we will have an operational control that will provide us coal security in a cost effective way," Verma told Reuters by phone.
He said ICVL would use existing infrastructure in Mozambique to optimise its operations and would participate in the development of projects such as railways and ports if needed.
Verma expects the deal to be closed in two months.
The Benga mine, 35 percent owned by India's Tata Steel Ltd
Once production is ramped up to 12-13 million tonnes, ICVL will bring in 60 percent of the production to India. The rest will be used by Tata Steel under an offtake deal, Verma said.
This is the first acquisition by six-year-old ICVL, comprising state-owned firms such as Steel Authority of India Ltd
Apart from ICVL and Tata Steel, Coal India, Essar
Mozambique exports most of its coal through the port of Beira, on its central coastline with a capacity of 6 million tonnes a year. But the facility rarely reaches its potential and suffers from high maintenance costs as it is prone to flooding and requires constant dredging. [ID:nL5N0MT1M2]
Coal rail capacity is around 6.5 million tonnes a year yet rarely reaches even this due to frequent disturbances, mainly due to technical faults and flood damage.
All these makes transportation of coal and expensive affair.
The cost of transporting 1 tonne of coal from the mine of India's Jindal Steel and Power Ltd
In Australia, the mine to port cost is just about $10 per tonne, he said on Thursday on the sidelines of a conference.
(Editing by Alison Williams)