Aditya Birla Group, Other Indian Metal Majors Look To Foreign Mining

Indian metal producers have been increasingly looking to foreign shores to acquire natural resource assets (the fancy phrase for “mines”) in order to meet their production demands.

Faced with long procedures, delayed government permissions for land acquisition proposals and even bans on mining in some areas, some of India’s largest groups like the Aditya Birla Group (ABG), Adani Enterprises Ltd, GVK Power and Infrastructure Ltd, JSW Steel, and Sesa Goa Ltd have been in the hunt for stakes in captive mines abroad.

Recently, the Kumar Mangalam Birla-controlled ABG decided to increase its previous bid for Western Australia’s Northern Iron Ltd by 14 percent to AUD $518 million. Northern Iron operates the Sydvaranger iron ore mine in Norway, where it plans to double the annual output to 5.6 million metric tons.

The ADG had offered between AUD $1.23 and $1.29 per share for Northern Iron earlier, but increased it further to AUD $1.40 per share on July 23.

The ADG group, though, may have to up its offer even further. On July 31, within days of the Group’s offer of AUD $518 million to buy out Northern Iron, the Australian iron ore miner said it had received a counter-bid of AUD $525 million from a Swiss trading company, Prominvest AG. Prominvest’s offer was pegged at AUD $1.42 per share.

That apart, another case in point of Indian companies looking to other countries for mines may be the Naveen Jindal-promoted Jindal Steel and Power’s decision to buy Canada’s CIC Energy Corp. for a US $116 million all-cash deal. CIC’s Mmamabula coalfield in Botswana has an estimated mineral resource of about 2.4 billion tons.

The chairman of Jindal steel was quoted by Reuters as saying his company was looking at coal and iron ore projects in South America, Africa and Australia as part of its aim to increase self-sufficiency in the raw materials required to make steel.

Australia, with Canada in a close second, seems to be everyone’s favorite destination. A report in the Business Standard quoted Rajeev Pant, the country head of National Australia Bank, as saying that a large number of Indian clients in the metal space were actively looking for acquisitions in Australia. The bank opened up in India just seven months ago.

Since developing mining assets in India has been an upward climb for some time now, companies say they have no choice but to look for mines overseas. The ABG already owns copper mines in Australia and is seeking to expand its presence there.

Another Indian mining major, Sesa Goa, plans to spend as much as US $81 million (Rs 4.5 billion) to tap the mine in Liberia this year after failing to double output in India. Mines at Western Cluster Ltd., 51 percent-owned by Sesa, a unit of Vedanta Resources Plc (VED), may have as much as 3 billion tons of the magnetite variety, up from an estimated 1 billion tons.

The company, India’s biggest iron ore exporter, has 374 million tons of reserves at home. Output fell last quarter because of a mining ban in the Indian state of Karnataka.

by Sohrab Darabshaw