CIL may close deal with overseas coal miners within three months

State owned Coal India Limited (CIL), which is eyeing partnerships with international coal miners to plug the demand supply shortfall of the dry fuel in the domestic market, hopes to arrive at a settlement with some of them within three months.

Nine global mining firms including Anglo Australian mining major Rio Tinto, Peabody Energy of Australia as well as Massey Energy and Murray Energy, both based out of USA had given presentations to CIL.

CIL is conducting the financial and technical due diligence of these firms and the process is expected to be completed within three months.

“We haven't taken a call on the number of firms that we are going to tie-up. CIL is currently doing the due diligence on the global miners that have given presentations to us and this will take three months”, a highly placed CIL official told Business Standard.

CIL which is keen on expediting the process of collaboration with the international mining firms is yet to decide on the nature of the strategic partnership.

The public sector coal major is exploring three different business models- entering into long-term coal supply pacts with the overseas mining firms, going for outright purchase of the mining assets or operate the mines jointly with the mine owners.

“We are open to any of these three business models for forging partnerships with the international coal miners. Our ultimate objective is to make imported coal available in the country at a cheaper price”, the official said.

The domestic coal major had invited Expressions of Interest (EOI) from global mining firms in July 2009 for selection of strategic business partners in Australia, US, Indonesia and South Africa to undertake joint business initiatives in coal mining.

As many as 52 global mining firms had evinced interest in forging a partnership and 12 of them were shortlisted by CIL. Coal India had also constituted a high-level committee to work out the modalities of the tie-up with these overseas coal firms.

CIL with a cash reserve of around Rs 30,000 crore was looking to expand overseas by forging partnerships with global mining giants.

It may be noted that in March 2009, CIL was awarded two exploratory coal blocks- A1 and A2 in Tete province of Mozambique having an estimated reserve of one billon tonnes.

CIL is in negotiations with the Mozambique government for carrying out exploration work on the two coal blocks.

The mining activities on these two coal blocks, spread over 224 sq km, were set to commence after three years.

CIL has also formed a special purpose vehicle called International Coal Ventures Limited (ICVL) with four other state run firms- NTPC, SAIL, NMDC and RINL for acquisition of overseas coal assets.

The race for acquisition of overseas coal assets was gaining momentum in view of the burgeoning coal demand in India.

The domestic coal demand was projected at 730 million tonnes (mt) by 2011-12 but domestic coal production was pegged at 520 mt by then, thereby creating a shortfall of over 200 mt.