Bolivia encashes JSPL's $18-million bond on El Mutun delays
18 May 2010
The Bolivian government last week encashed Jindal Steel & Power Ltd (JSPL) entire $18-million bank guarantee for the El Mutun iron ore project since the company failed to make the necessary investments stipulated under the contract signed in 2007.
Confirming the encashment, JSPL's director Sushil Maroo said in an interview last week that the company has written to the Bolivian government stating that the encashment was against the contract terms and is negotiating to resolve the dispute.
Bolivia's mining director Freddy Beltran had said on 31 December 2009 that if JSPL failed to honour its pledge to invest $2.1 billion in the EL Mutun iron ore joint venture project under the time stipulated in the contract, the Bolivian government would not hesitate to scrap the contract. (See: JSPL could lose EL Mutun iron ore development rights in Bolivia)
After the Bolivian government twice rejected JSPL's revised investment plan, it gave the Indian company an ultimatum in early February to come up with a viable investment plan by April or face cancellation of the contract.
Top executives of JSPL had gone to the Bolivian capital La Paz, to hold talks with the Bolivian ministry of mining and metallurgy (MMM) to sort out the iron ore contract problems as well as the Indian steel maker's commitment to build a steel plant in Bolivia's Santa Cruz Department.
But the talks broke down after MMM turned down JSPL's request for changes in the contract terms after an earlier rejection of JSPL's revised investment plan on two occasions.