No Domestic Coal? No Sweat! Buy Your Own Overseas Mines, India’s Doing It

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Spurred by the government, India’s thermal and coking coal shortage should be mostly mitigated in the next few months as companies enter their final phase of due diligence to purchase various mines in the US, Indonesia and Africa.

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The companies were responding to a call by India’s coal minister who had asked them to aggressively pursue plans to acquire overseas mines to meet the nation’s energy needs. One of India’s leading steel producers, JSW Steel has already bought US mines that produce coal used to make steel. A few others have also acquired mines in Australia. While coking coal is used in the steel-making process, thermal coke is used for generation of electricity.

Demand is Growing

India’s demand for steel-making coal is expected to triple by 2020. Coal imports have been steadily climbing. Except for one month, India imported coal throughout all of this year and last. One estimate put this at a total of 158 million tons.

Recently, India’s state-owned company Coal India Ltd (CIL), which supplies about 80 percent of the country’s output, invited bids for a third phase of drilling in the African nation of Mozambique.

A report in the Business Standard said Coal India Africana Limitada (CIAL), a subsidiary of CIL, plans to continue exploration through outsourcing.

US, Africa, Canada Court Investors

In August 2009, Coal India Africana Limitada was granted two prospecting licenses for coal blocks in Mozambique’s Tete province for five years. The first phase of prospecting was concluded in May 2013, after its contract was awarded in November 2012. CIAL has a 5-year license for exploration and development of mines in Mozambique.

Another state-owned company, NMDC Ltd, is reported to be close to completing its due diligence for a thermal-coal mine of the Shree Renuka Group in Indonesia. The coal mine, which is likely to be used for trading purposes, will help the company to diversify its business beyond the mining of iron ore.

The final decision on the acquisition of this mine will be made once a team visits the mine in the Jambi province of Sumatra. Shree Renuka Energy, part of the Shree Renuka group, owns the mine through its listed subsidiary PT Renuka Coalindo Tbk.

Late last month, it was Canada’s turn to woo CIL. Canadian High Commissioner to India Stewart Beck met top officials of CIL and pitched them to invest in metallurgical coal (coking coal used by steel plants).

The Hindu Business Line reported that the High Commissioner also met with N Kumar, technical director of CIL.

Metallurgical coal, largely used in steel manufacturing, is the mainstay of the British Columbian economy. BC is a major province on the west coast of Canada. Metallurgical coal is the single largest export commodity of the province.

Kumar was quoted by the newspaper as saying it was a preliminary discussion since CIL has floated a tender for exploring investment opportunities abroad.

Until the purchase of mines is over, all signs indicate that India will continue to import coal in this fiscal year. It is already the world’s third-largest

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