India Eyes Mozambique, Russia Coal Mines for $300M

India's largest iron ore producer, NMDC Ltd., is currently in negotiation talks for a $300-million coal mine acquisitions in Mozambique and Russia.

Both investments aim to supply NMDC Ltd.'s 3-million tonne steel plant in central India, as well as a similar-sized plant it co-owns with OAO Severstal of Russia in southern India.

Narendra Kumar Nanda, newly appointed NMDC Ltd. chairman, told Bloomberg News the company wants to purchase a 360-million metric tonne deposit mine in Mozambique's Tete province and an 80-million tonne mine in Kemorovo region in Russia.

"We want to be prepared when our steel mills start operating," Mr Nanda said. "We can bring some coal from these mines to our plants and sell the rest for hedging purposes."

There are also plans to buy an iron ore and manganese mine in Amapa province in Brazil, but Nanda did not provide further details, Bloomberg reported.

NMDC will appoint advisers no later than end of this month to work out on the required due diligence works to acquire the assets, Mr Nanda said.

Indian steelmakers have been actively perusing the world for possible overseas coal mine acquisitions to address domestic supply shortage.

Experts and analysts had long argued setting up a local coal mine in India takes long to operate. It would have been just as easy for India to acquire coal especially since it is actually sitting atop 10 per cent of where the world's coal reserves are located, approximately worth 267 billion tonnes. But most of Indian coal reserves lie in forest areas and cannot be mined due to environmental concerns.

It would be much better to acquire assets than establish one. For NMDC, which has $4 billion of cash on hand, this would not be a problem.