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Coal India weighs up Limpopo deal

Yolandi Groenewald | Mon, 30 Jan 2012 06:44

[miningmx.com] -- THE board of Indian state-owned mining company Coal India will decide in Kolkata on Monday whether to go ahead with a controversial possible joint mining venture with the Limpopo provincial government.

If the board agrees, the deal will be signed by March this year and will see Coal India taking a majority stake, while the Limpopo government retains 26% of the company which will mine coal in the province.

Coal India, which has since postponed a fact-finding mission that was due to happen this month, said last week it had $817m (about R6.35bn) that it has to spend by March this year, and the Limpopo government was hoping to receive a cut of the state-owned entity’s massive war chest.

This was despite the Limpopo government recently being placed under administration by national government.

Coal India was also interested in a coal deal with Mozambique, but scrapped their tender a week ago to pursue “other global opportunities”.

Limpopo’s own state-owned mining company Corridor Mineral Resources (CMR) – a wholly-owned subsidiary of Limpopo Economic Development Enterprise – entered into a joint venture with Coal India to develop new coal mines in the province last year. The other government partner is Trade and Investment Limpopo (TIL).

The Indian company produces 80% of India’s coal and is under pressure to deliver coal to feed 20 new coal-fired power stations being built in India.

Five Limpopo departments were recently placed under national government administration and the fiscus is unable to pay its service providers.

The Indian mining deal was put together over the past two years with Premier Cassel Mathale leading the charge, holding several high-level talks in India.

Mathale’s spokesperson, Mashadi Mathosa, told City Press it was the Indians who approached the premier first with a proposal to do business with the provincial government.

“The premier then advised Coal India to meet with TIL and CMR to start talks on the subject,” Mathosa said.

She confirmed Coal India’s trip had been postponed and no date for another visit given.

The memorandum of understanding between the parties was signed in September last year. “The parties have agreed to work hand-in-hand on identification towards the exploration of coal resources in Limpopo province,” she said.

India has expressed an interest in partnering with Limpopo in scientific development and exploration of coal resources in order to export coal to meet the current and growing demand for it in India.

“The memorandum of understanding indicates that the parties are working towards a productive partnership that will benefit both the Limpopo province and the people of India,” she said.

The Limpopo government holds no coal prospecting rights and would have to buy out other rights holders, Trade and Investment Limpopo chief executive Motalane Monakedi has said previously. Monakedi has further said that they were negotiating with at least one rights holder.

Coal mining in large parts of Limpopo, including the Soutpansberg, is problematic due to the lack of water.

- City Press