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Indian coal giant buys SA rights

Jan 08 2012 11:25 Jan de Lange

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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.

 
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