Tata Steel to buy 5% stake in Australian coal mine

By agencies   |   Tuesday, 19 July 2005, 07:00 Hrs
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MUMBAI: Tata Steel today announced that it is investing in coal mines in Australia.

The steel major has signed agreements to buy a five percent stake in Carborough Downs Coal Project located in Queensland, Australia.

Tata Steel and other steel companies have been looking to invest in coal mines overseas, primarily in a bid to ensure sustained supply of coal.

As per the company’s news release, this decision assumes importance in the backdrop of the company's expansion plans. "Tata Steel has ambitious plans to grow by setting up greenfield plants or acquiring capacities in India and overseas, which is in keeping with its long-term vision and strategy.''

In September 2004, Steel Authority of India Ltd (SAIL) had signed a memorandum of understanding with BHP Billiton to form a strategic alliance to jointly develop coking coal and iron ore mines both in India and other countries. SAIL would require continuous supply of hard coking coal as well as iron ore to meet its plan of raising hot metal production from 13 million tonnes to about 20 million tonnes by 2011-12.

According to company's spokesperson, negotiations between SAIL and BHP Billiton are still on.

With most of the steel companies announcing capacity expansion plans, requirement for raw material especially coking coal would be important. While most steel companies have entered into long-term purchase deals with coal mines abroad, some of them have also explored the possibility of investing in these mines as partners.

Ispat Industries had acquired 51 percent stake in a coke oven plant in Bosnia. Tata Steel plans to increase its steel production capacity to 15 million tonnes by 2010 from the current level of five million tonnes. The Carborough Downs coal project is majority owned and operated by a subsidiary of AMCI Holdings Australia Pty Ltd. AMCI International AG, the apex holding company of AMCI Holdings Australia Pty Ltd, is a large global producer, shipper and trader of high-grade metallurgical coal.

Carborough Downs is an undeveloped underground coking coal project with production slated to commence in 2006. The project life is currently estimated at 14 years and approximately 58 million tonnes of raw coal is expected to be mined during this period.

"There is a further potential resource of 100 million tonnes of raw coal in the unexplored areas and deeper seams. The clean coal envisaged to be produced will be low-ash coking coal and PCI coal, highly suitable for steel making,'' Tata Steel said in the release.

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