Coal India Eyes Foreign Expansion of Mining Operations

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The world’s largest coal miner, Coal India Ltd (CIL), has decided to diversify by looking at foreign shores.

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While fossil fuel will remain the primary source of power generation for at least the next two decades, CIL thinks it’s the right time for expansion, according to a company official.

CIL’s strategy shift to cut reliance on the fossil fuel will be two-pronged: it may have one unit to manage its local operations (which includes the mining of iron ore, bauxite and manganese), and another to expand into copper and nickel mining overseas.

CIL initially started as a fully government-owned venture in 1975. In 2010, it held an IPO in which 20% of its shares had been off-loaded. A similar offering with the same percentage of equity was conducted in early 2015.

Employing over 330,000, CIL has an annual revenue of over $130 million, with a market cap of approximately $33 billion.

This is not the first time that CIL has decided to look at foreign mines as part of its expansion. In the past, it made unsuccessful attempts in buying stakes in overseas coal mines.

The new plan to diversify into mining metals such as copper and nickel could be part of the miner’s long-term strategy to firm up revenues, analysts say.

Not Just a Coal Company

At a recent seminar, S N Prasad, CIL’s marketing director, told delegates the thinking in the company was that it no longer wanted to be known as merely a coal company. CIL wanted to diversify and enter iron ore, and bauxite mining. CIL’s core competency will hold it in good stead in this new foray.

Some reports said CIL had identified copper and nickel mines in Africa, and appointed research firm KPMG to prepare the roadmap that will see CIL emerge as a diversified mining company by 2030, something on the lines of Rio Tinto.

A Changing Mining Scene

Meanwhile, on another front, the Indian government has plans to put up 10 mines for commercial mining of coal, a long-awaited policy shift, analysts say. Most of these will be in the provinces of Odisha, Chhattisgarh, Madhya Pradesh and Jharkhand.

In 2014, the Supreme Court of India canceled all existing licenses of coal mines on the grounds that there were no objective criteria for giving out mining leases. At that time, many predicted this would result in large-scale commercial mining by the private sector, including many firms from overseas.

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But that has not happened. With the new policy shift, full-scale commercial coal mining was likely to happen.

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