INDIA BUSINESS WORLD - JUNE 2006
THE MONTH THAT WAS...

JSPL BAGS BOLIVIA MINE

IN ONE of the largest overseas acquisitions in the mining sector, Jindal Steel and Power Ltd (JSPL) announced bagging the development rights for the El Mutun iron ore mine in Bolivia . The company would invest $2.3 billion over a 10-year period for mining and setting up a 1.7-million tonne steel plant there.

The Mutun mine is estimated to have a total reserve of 40 billion tonnes. The Jindals will be able to mine half of it as they have been given mining rights for 10 years. JSPL will also set up a 6-million tonne DRI (direct reduced iron/sponge iron) plant and 10-MTpellet plant, besides a 400mw captive power plant there.

JSPL executive vice-chairman and MD Navin Jindal said the company has agreed to pay the Bolivian government 8-10% royalty on export of iron ore and concentrates (pellets) and a 5% royalty on export of steel.

The formal contract for the development rights for the mine is to be signed within a month. JSPL is expected to submit the technoeconomic feasibility report on the project to the Bolivian authorities within 2 months. The company has to provide a bank guarantee of 1-2 % of the investments upfront.

Mr Jindal said since Bolivia is a landlocked country, the company will have to invest heavily in developing infrastructure for transportation of the products to the nearby river, which is about 90 km away. From there, these products will have to be taken to the sea using barges.

He said company plans to fund the Bolivian projects mainly through borrowings. “The investment plan is spread over a long period and we have the capacity to raise this kind of money during this period,” Mr Jindal said, adding the projects would be funded in a 60:40 debt-equity ratio. Initially, the Bolivian government had been demanding a 54% royalty on exports of iron ore and concentrates.