Mumbai: Tata Steel Ltd will invest A$100 million ($88 million) in a joint venture project with Australia''''s Riversdale Mining Ltd to take a 35 per cent stake in its Mozambique project.
Tata Steel will also buy 40 per cent of the coking coal output, the
Sydney-based company said in a statement.
Tata Steel Ltd has signed an agreement with Riversdale Mining Ltd to set up a special purpose joint venture vehicle to develop a hard coking and thermal coal project at key coal exploration tenements held by Riversdale in Mozambique, Tata Steel said in a filing with the Bombay stock Exchange (BSE).
Under the terms of the agreement, Tata will pay A$100 million (approximately US$88.2 million) to acquire a 35 per cent stake in the project. Tata will have a key position in the joint venture formed to develop the Mozambique coal project, as well as a 40 per cent share of the off-take for coking coal.
Tata will also have the option to participate above this level of
tonnage, and may participate with Riversdale in future opportunities on Riversdale''''s surrounding tenements.
The joint venture comprises two licences (the Benga and Tete licences) and covers an area of 24,960 hectares (approximately 96.7 square miles). Riversdale Mining holds a total acreage of over 290,000 hectares (1,120 square miles) in Mozambique.
Riversdale Mining had recently announced a major coal resource in the Benga Licence. Based on the drilling results undertaken by Riversdale, the total Resource is estimated at 1.225 billion tonnes categorisd as Inferred Resources and is in accordance with the JORC Code 2004. Of this, a total of 720 million tonnes is considered to have the potential to be extracted by open-cut methods.
The coking coal derived from this project will be supplied to the Tata Steel Group''''s facilities in Europe, Asia and elsewhere.
Mozambique is fast-becoming a region of global significance for the coal sector. In addition to Riversdale and Tata Steel''''s involvement, one of the world''''s largest mining groups, Companhia Vale do Rio Doce (CVRD) has also invested significantly in plans to advance a massive coal project next to Riversdale''''s tenements in Moatize.
"Tata Steel is very pleased to have signed this agreement. Tata Steel has vast experience of coal mining spanning over several decades and will be contributing technical expertise to the joint venture," said B Muthuraman, managing director of the company, adding that this investment is a significant step in Tata Steel''''s initiatives for raw material security.
"It gives Tata Steel an opportunity to participate in the development of the region as a coal resource for its global operations. This will enhance Tata Steel''''s long term competitiveness. It is Tata philosophy to participate and be a part of a country''''s development process and Tata Steel through its well known and well acknowledged social initiatives will a positive make a positive impact on improving the quality of life of the people of Mozambique," he further said.