Jindal Steel Buys Iron Ore Mine in Cameroon for Rs 100 Crore

New Delhi: Jindal Steel and Power Ltd (JSPL) on Tuesday bought 100 per cent stake in Australian mining and exploration company Legend Mining's iron ore project in Cameroon for 17.5 million Australian dollars (Rs 100 crore).

The acquisition of Ngovayang Project, located in south-western region of the West African country, is aimed at securing raw material for JSPL's recently-commissioned two million tonnes per annum (mtpa) steel plant in Oman.

JSPL has already paid 6 million Australian dollars in the first tranche of the deal and will pay another 6 million in July next year.

The last tranche of 5.5 million Australian dollars would be paid after execution of a mining convention between JSPL and the Cameroon government, Legend said in a filing to the Australian Securities Exchange (ASX).

The Cameroon project covers around 2,970 square km area comprising three exploration permits. Legend had carried out an extensive aeromagnetic survey in February 2010.

"Legend is now in a strong position financially to pursue exploration activity in its wholly-owned Fraser Range tenements and new project opportunities. We now have cash and liquids of more than 15 million Australian dollars," Legend managing director Mark Wilson said.

When contacted, a JSPL spokesperson said, "We don't have any comment on Cameroon deal yet."

Legend had in November last year announced that it had entered into a share sale and debt assignment agreement (SSDAA) with a wholly-owned subsidiary of JSPL for the sale of Legend's 90 per cent interest in Camina SA, the holding firm of Ngovayang project in Cameroon.

"Under the SSDAA, Jindal will acquire 100 per cent of the shares of Legend Iron Ltd and the inter-company loans provided by Legend to Camina, for a total cash of 17.5 million Australian dollars," it said.

Apart from Oman, JSPL has a 3 mtpa steel-making plant at Raigarh in Chhattisgarh and a 2 mtpa facility at Angul in Odisha. It generally requires 1.6 million tonnes of iron ore to produce one million tonnes of steel.     

The Oman facility buys the raw material from the open market to run the plant. Operating a plant with raw material purchased from the market leaves a company vulnerable to price vagaries, which can impede growth and affect profitability.