Coal news and updates

Will CIL re-join ICVL post-acquisition of Rio assets?

August 11: With the acquisition of coal assets in Mozambique from Rio Tinto by International Coal Ventures Ltd (ICVL), speculation is rife that Coal India Ltd (CIL) may consider re-joining the consortium.

ICVL was formed as a consortium of five public sector undertakings – SAIL, NTPC, RINL, NTPC and NMDC – in 2009 to pursue acquisition of overseas coal properties.

Incidentally, in May 2012, the CIL board had decided to quit the consortium after it found that other partners - SAIL, RINL and NMDC – were more interested in coking coal assets.

CIL, on the other hand, was more interested in acquiring non-coking coal assets.

Another partner, NTPC Ltd, had also quit the consortium. Though the official reason for exiting from ICVL was not provided by the power behemoth, it is believed that the decision was primarily led by its plan to pursue overseas coal asset acquisitions on its own instead of going through the consortium route.

A senior official from CIL, on August 11, while refusing to comment on the benefit, if any, that might accrue to the company following the acquisition and subsequent possession of Rio Tinto’s assets by ICVL in Mozambique said, “As per our board’s decision, we have decided to come out of ICVL. But, till now, we are not completely out of ICVL either. We are hanging in between.”

“We had raised some issues with ICVL, but had not received any response from them and the stalemate is still on,” the official added.

Asked whether it meant that CIL is still in ICVL, the official said, “Our board’s decision is to get out of ICVL. However, the coal ministry had advised us to reconsider the decision based on which we had sought some clarification from ICVL, which we have still not received.”

On July 28, ICVL had finalised the takeover of Rio Tinto’s operating coal mine and coal assets in Mozambique with estimated reserves of 2.6 billion tons. Rio had acquired the asset from Riversdale Mining Ltd in 2011 at about $3.9 billion.

The portfolio of the assets acquired by ICVL includes Benga (65%) and Zambeze (100%) and Tete East greenfield coal assets which have substantial resources of coking coal. The Benga project is already under production and yields both coking and thermal coals.

Though ICVL had not announced the deal value with Rio Tinto, industry sources estimate it at anywhere between $100 and $400 million.