ICVL Likely to Submit $200 Million Bid for Rio Tinto Mozambique Mines: Report

International Coal Ventures Ltd (ICVL), a consortium of PSU firms for buying mines abroad, is likely to submit a $200 million bid within a fortnight to mining firm Rio Tinto for buying its all three coal mines in Mozambique.

Rio Tinto Coal Mozambique has 100 per cent stake each in Zambeze and Tete East projects and 65 per cent in Benga Mine, in which Tata Steel holds the remaining 35 per cent. The coking coal mines are located in the north of the country.

"ICVL had preliminary talks recently with some Rio Tinto officials in Mozambique and it is likely to submit a binding bid within a couple of weeks intending to fork out $200 million for buying its stake in all three projects," a source in the Steel Ministry said.

The mines have estimated reserves of around 200 million tonnes of both coking and thermal coal. It generally costs $1 million to acquire a mine having one MT reserve, the source said.

In November 2007, Tata Steel bought a 35 per cent stake in the prolific Benga mine from Riversdale Mining Company, a company listed in Australia. British-Australian mining firm Rio Tinto took over Riversdale Mining Company in April 2011.

The Benga coal mine was officially opened in May 2012 with first coal exported in June 2012.

The acquisition will help ICVL, which is carrying out due diligence in at least two other assets, to achieve its 2019-20 target of owning 500 MT coking coal reserves five years in advance.

It will also aid in reducing India's forex outgo on imports of coking coal, a key steel-making input.

While Rashtriya Ispat Nigam Ltd (RINL) depends entirely on coking coal imports to meet its demand, SAIL imports 75 per cent of its needs from abroad.

The country's steel sector imports about 30 MT coking coal now and with the rising capacity, the demand for the key input is expected to rise further in the coming days.

ICVL enjoys autonomy accorded to Navratna firms without having the formal status. Its board is empowered to take calls on investments of up to Rs 1,500 crore, but beyond that, it needs assent of a higher authority.

Formed in 2009, ICVL initially had members such as SAIL, NTPC, CIL, RINL, NMDC.

NTPC, however, decided to opt out of the consortium as it was seeking thermal coal blocks, while other members were keen on coking coal.

The intent to buy the asset comes at a time when the price of coking coal has slipped to $130-132 per tonne from its peak of $350 a tonne two years ago. With the price of the raw material on the wane, the asset prices have also come down internationally.

ICVL, since its inception about four years ago, came close to buying foreign assets on different occasions but has so far failed to do seal a deal.