Tata Steel buys 35 pc in Mozambique mining firm | business | Hindustan Times
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Tata Steel buys 35 pc in Mozambique mining firm

Tata Steel and Riversdale Mining Limited signs a joint venture agreement to set up a hard coking and thermal coal project in Mozambique, reports Indulal PM.

business Updated: Nov 30, 2007 21:24 IST
Indulal PM

After its $12.3 billion acquisition of Anglo-Dutch steel maker Corus, the Tatas have made their first step to ensure raw materials for its steel plants across the globe.

Tata Steel and Australia's Riversdale Mining Limited on Friday signed a joint venture agreement to set up a hard coking and thermal coal project in Mozambique in southeastern Africa. Tata Steel shares closed at Rs 825.70 up 2.94 per cent while the benchmark sensex rose 1.89 per cent at 19363.19.

Tatas will invest close $88.5 million (353.11 crore) to pick 35 per cent equity in the project. Tatas will have the right to source 40 per cent of the total coal produce from these mines.

The proposed joint venture comprises two licenses (the Benga and Tete licenses) and covers an area of 24,960 hectares. Riversdale Mining holds over 290,000 hectares in Mozambique.

Based on drilling data, the total mining capacity of these fields are estimated at 1.23 billion tonne. "The JV is part of our strategic move to ensure raw material security. Still, we are looking for iron ore and coal assets across the globe," Tata Steel CFO Kaushik Chatterjee told HT. Majority of the coking coal from this Mozambique project will mainly go to Corus, he added. With the acquisition of Corus, Tata Steel needed to scout for additional raw material supplies as the raw material feed from its own assets has been reduced to just over 25 per cent, analysts said.

"Before the acquisition of Corus, the Tatas could meet about 80-85 per cent of its raw material supply from its own assets. After the buyout, it has been reduced to 20-22 per cent," said a Mumbai-based analyst with Macquire Research. Currently Tatas are buying coking coal from BHP Billiton Ltd and Rio Tinto Group mines in Australia.

The Tatas will also have the option to participate above this level of tonnage, and may participate with Riversdale in future opportunities.

The group chairman Ratan Tata had told Tata Steel shareholders earlier this year that the company will look for raw material assets across the world to meet Corus's requirements.

Tata Steel Managing Director B Muthuraman had said the company would look at setting up of joint ventures and investments in strategic assets especially in Australia, Africa and Latin America.

The Corus acquisition made Tata the world's sixth-biggest steel company, able to churn out 28.1 million tonne of crude steel a year.