Jindal Steel & Power Ltd. is considering entering into an iron-ore plant acquisition deal of up to $2 billion in West Africa, in order to fuel operations in India and Oman.
The company hopes the acquisition will secure 1 billion metric tonnes of iron-ore, needed to increase production at Jindal’s factories located in Asia and the Middle East; where mining regulations have led to a pinch in materials available to fuel industrial operations.
Jindal has set itself a target of increasing output from its factories fourfold, Executive Director Manish Kharbanda told reporters in an interview, and is willing to pay up to 350 billion Indian Rupees ($6.5 billion) in order to resolve the iron-ore shortage issue.
Kharbanda disclosed that the company has explored options for acquisition in Gabon, Ghana, Liberia, Mauritania, Sierra Leone and Sudan; and has its eye set on a mining operation in West Africa although the Executive Director did not reveal the precise vendor of the mine.
Jindal already has experience of mining operations on the African continent; as such the company is well-placed to expand its presence in Africa. Currently, Jindal has operations in Mozambique and South Africa, and has purchased Canadian CIC Energy Corp, which is opening a coal facility in Botswana. Indeed, speaking on the proposed acquisition in West Africa, Kharbanda said: “It’s the familiarity with African culture that draws us to that continent,” adding: “Managing cultural diversity is a big challenge in doing acquisitions.”
The New-Delhi based steel producer previously relied on iron ore reserves from South America to fuel its Indian and Oman-based activities, however in July the company walked away from a contract with the Bolivian government following a disagreement; thus putting a stop to Jindal’s plans to build an iron-ore mine in El Mutun.
Commenting on the South American failure, Kharbanda noted: “The lesson we learnt from Bolivia is to not put all our eggs in one basket.”
It is pursuant to this failed acquisition, then, that the company is under pressure to find the necessary reserves and has settled on West Africa as its location of choice. However, the company is aware of a number of potential difficulties in the secret deal, Kharbanda saying that the uncertain extent of the reserves at the proposed location and the lack of local infrastructure for transportation of goods were significant sticking points.
By; Gabriella Mulligan