Fin24

Indian coal giant buys SA rights

2012-01-08 11:25

Johannesburg - Later this month Coal India Ltd (CIL), the world's biggest coal producer, will sign an agreement with the Limpopo government in terms of which it will receive mining rights on various coal blocks in that province.

Last week in New Delhi Nirmal Chandra Jha, who chairs the state-controlled CIL, said the board would within the coming weeks consider a proposal in terms of which CIL, India's fourth largest company by market value, would receive interests in coal mines in the province. together with the Limpopo government.

A senior official in the Limpopo government told Sake24 that the provincial government was acting more as a “broker” in this transaction worth many hundreds of millions.

CIL will not acquire mines that are already operational, but rather promising coal blocks where mines will be developed.

Limpopo Premier Cassel Mathale, a confidant and friend of suspended ANC Youth League leader, Julius Malema, apparently last year invited CIL to participate in developing the province’s coal industry.

This was shortly after the Mozambican government had awarded mineral rights on coal blocks in that country.

CIL had received the blocks entirely free of charge after the Mozambican government asked permission to develop mines there. But they paid us several hundred millions,” said the Sake24 source.

These mines will be developed in partnership with the government of Limpopo which, through a state-controlled corporation, will retain a 26% interest in the mines, probably to devolve it to black empowerment partners for CIL to comply with the requirements of the mining charter.

“The Limpopo government has already handed CIL a draft agreement which took many months of negotiation. This will be discussed at CIL’s next board meeting to be held in two weeks’ time.

“If the CIL board accepts it, a CIL delegation will visit the country during the week of January 21, during which the agreement will be signed and formally announced,” the Sake24 source said.

CIL produces more than 80% of India's coal and operates around 500 coal mines in the country. It increased its 2003/04 coal production of 300m tonnes to more than 400m tonnes in 2008, but is under serious pressure to deliver even more to the over 20 new coal-fired power stations being built in the country. At the end of December coal stocks at the country's power stations were 30% lower than at the end 2010.

CIL has not yet started to develop the Mozambican coal blocks. Only in December did the Indian government approve guidelines permitting the purchase of interests in foreign coal mines.

CIL was established in 1974 after all coal mines in India were nationalised, and it was listed on the Mumbai Stock Exchange in November 2010.

The mines were nationalised because the government reckoned that private owners were not investing enough into the development of the industry.

At the time there was also concern about the parlous working conditions in the mines.

 - Sake24

For more business news, go to Sake24.com.

 

Comments
  • 100002724019652 - 2012-01-08 13:07

    why cant jobs be created and skills developed in stead of selling off our resources to create more instant bee millionaires, while the people who live in limpopo continue to suffer.We have to start developing our own resources.Just imagine a company started because of nasionalisation in India nasionalises South Africas coal. yet again we are continueing to behave like colonised people.How does this gel with Mathale`s friends call for nasionalisation or is this what nasionalisation will be used for: to enrich the elite.

  • thysdb - 2012-01-08 14:24

    i smell corruption.....watch this space....

  • pawsaw - 2012-01-08 17:49

    So now we are partially owned by India and going next will be?

  • Freedom Gumede - 2012-01-08 18:17

    Poor decision. Should have given the rights to a south African company. Should avoid corruption and allow no political interference or tenders. If a south African company had this, the profits and money remain in our land. A poor decision by a government that wants a few rands now instead of thinking about the future.

  • Ken - 2012-01-08 19:27

    We have a vast untapped resource....Sunshine. Why not rather get investment to tap this clean source of energy ?

  • Figjam - 2012-01-08 20:03

    In Limpopo? Did someone check with Juju first. What happened to "nationalisation" and the mineral wealth being owned by "the masses"? Hypocracy or just plain stupid?

  • Saksak Motsepe - 2012-01-08 20:08

    LOL, India nationalised their mines in the 70s and now they are buying foreign interests

  • jeremy002 - 2012-01-09 05:38

    This is crazy. After all the talk about "economic empowerment, some clown in government, either national or provincial, goes and sells those rights to foreigners? Talk about the left hand not knowing what the right hand is doing? Must be money involved, money into someone's private bank account maybe? What about the impoverished local population? Then there is the fact that SA has plenty of skills and experience to develope coalfields. Then there is the worrying knowledge that there is a lot of coal in the Kruger Park........oops.

  • PietBull - 2012-01-09 07:55

    How poor is this, firstly they carry on putting the blame on the past, they want to reform land and now this!!!!! I am for internasional investing but boy everyday its something different, its like the goverment wants to fail!!!

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