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India Venture to Bid for Coal Block in Mongolia

NEW DELHI – India's International Coal Ventures Pvt., or ICVL, plans to bid for developing huge coal reserves in Mongolia's Tavan Tolgoi mining deposit, government officials and industry executives said Thursday.

ICVL's interest in the Mongolian block comes at a time when coal and other resource sectors are seeing a wave of multibillion dollar mergers and acquisitions activity globally, much of it driven by increasing consumption in emerging economic giants China and India.

The Indian company is lining up for a tender offer by the Mongolian government scheduled Jan. 17 to develop part of the Tavan Tolgoi mine in the country's southeast. The mine contains some of the world's largest unexploited reserves of coking coal, a key raw material for making steel. Overall, the mine has an estimated coking and thermal coal reserves of 6.4 billion metric tons.

ICVL will likely bid for a share in the mine's western block with reserves of 1 billion tons, a Mines Ministry official told Dow Jones Newswires.

About 70% of the block is likely to be coking coal, for which Indian steel companies mostly rely on imports, he added.

If ICVL bids, it will face stiff competition from Japanese and Korean companies.
In recent days, bidders from Japan and South Korea have said that they are interested in developing the Tavan Tolgoi deposit. Their interest comes after Mongolia's government abandoned a previous plan to develop the entire site using contract miners.

Mangolia is now offering to co-operate with strategic investors, giving them a chance to invest in and develop portions of the deposit located in the western Tsankhi area.

ICVL was formed in 2009 as a joint venture among five state-run companies--Steel Authority of India Ltd., NTPC Ltd., NMDC Ltd., Rashtriya Ispat Nigam Ltd., and Coal India Ltd. – to acquire overseas coal assets.
The ministry official said that if ICVL wins the bid, it could look at partnering with private steel and mining companies such as Tata Steel Ltd. and Essar Steel Ltd.

However, an executive with a private steel company said: "We will have to iron out issues such as equity holding and investment required for infrastructure development in the Mongolian mine before deciding to join ICVL."

Indian companies have been scouting for coal assets overseas as local production is insufficient to meet demand. India's coal output in the fiscal year through March is estimated to be 573.42 million tons while demand is projected at 656.31 million tons. The shortfall will have to be met through imports.
ICVL has been looking for thermal and coking coal assets in New Zealand, Mozambique and the U.S., but so far hasn't been able to strike a deal.

Last month, ICVL appointed Citibank to advise on acquiring a stake in Australia's Riversdale Mining Ltd. The move came after Rio Tinto Ltd. made a A$3.9 billion takeover offer for Riversdale, which has mining assets in Mozambique.

Write to Rajesh Roy at rajesh.roy@dowjones.com

 
 
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