ESSAR Minerals, part of the Essar Group, has said that it had agreed to acquire US-based Trinity Coal for $600 million, as part of an integration exercise for Essar’s steelmaking operations in north America. Essar Minerals will buy Trinity Coal from Denham Capital, a US-based commodities-focussed investment firm, that owns Trinity Coal Partners, Essar Group chief executive Prashant Ruia told reporters at a conference here. “The acquisition will help us lower the cost of production at Algoma, Canada, and will ensure that we become an integrated player in the region.”
Essar Algoma currently makes about 2.6 million tonnes of steel and is on track to expand its capacity to about 4 million tonnes. While coal from Trinity would be used to feed the steelmaking operations, the company gets its iron ore, the other vital raw material for steelmaking, from Minnessota in the US, which are also owned by Essar Minerals. The iron ore mines have reserves of about 1.4 billion tonnes, while Trinity’s coal mines have reserves of about 200 million tonnes with both steam coal and met coke. The former is used by power plants, while metcoal is for steelmaking.
Trinity is one of the top 10 coal companies of US and owns and operates mines in Kentucky and West Virginia. The reserves are split almost equally between metcoal and steam coal. While metcoal would be used by Essar Minerals, Trinity already has existing agreements for the supply of steam coal with power plants in the US.
“It’s still too early to say whether in future we would use steam coal from Trinity for our power plants in India but as of now, we have mining concessions in Africa and Indonesia and would use coal from these regions to feed our power plants in India,” said Mr Ruia. The Essar Group currently has 1,200 megawatt of power generation capacity and is close to expanding that capacity to 6,000 MW. Indian power companies have typically sourced coal from Africa, Indonesia and from Australia for their use. It’s economically unviable for companies to import steam coal from the western coast in the US. “Trinity and Essar are well suited to work together to meet the production needs of Essar’s facilities,” Denham Capital managing partner Carl Tricoli said in a statement.
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