Jindal will receive 500,000 tonnes per annum of coking coal produced from Gujarat’s mines in New South Wales over 10 years.
Gujarat NRE Coking Coal executive chairman Arun Jagatramka said Jindal would have an option to buy an additional 500,000tpa depending on production levels.
Jindal will also buy 100 million Gujarat shares at 25c per share, representing a premium of 48% to its last traded market price on the Australian Securities Exchange. This would deliver Jindal Steel a 14% stake in the company.
Jagatramka said the agreement provided a secure supply of premium hard coking coal to Jindal Steel while diversifying Gujarat’s customer base.
Most coal produced at Gujarat NRE’s two Illawarra mines at Russell Vale and Wongawilli is exported to India to its parent company, Gujarat NRE Coke Ltd, for use at its own coke plants in India.
Gujarat NRE Coke Ltd is India’s largest independent manufacturer of metallurgical coke in India.
New Delhi-based Jindal has an annual turnover of $US3.5 billion and is part of the $15 billion diversified O.P. Jindal Group. It has committed investments exceeding $15-20 billion in the future and has several business initiatives running simultaneously across continents.
The Indian government is proposing to create a sovereign wealth-type fund to buy overseas coal assets.
For some time the Indian government has been encouraging private and public entities to buy coal assets abroad and now it is prepared to put some skin into the game.
Indian coal minister Shri Sriprakash Jaiswal told a Confederation of Indian Industry round table that acquisition of coal properties abroad had become more important in light of domestic production constraints and the growing demand for coal from different consuming sectors, particularly steel and power.
“We are facing tough challenges in meeting the energy needs of the country,” he said.
“The nation’s energy requirements are envisaged to increase to about 1677 to 2077 million tonnes by 2031-32 as per the projects made in the Integrated Energy Policy Committee report.”