ICVL acquires Rio Tinto's coal assets in Mozambique

State-run International Coal Ventures Pvt Ltd (ICVL) has signed an agreement to acquire Rio Tinto's coal mine and assets in Mozambique for about $50 million. This will be the first acquisition of ICVL since its inception in 2009.

ICVL is a joint venture company of Steel Authority of India, Coal India, Rashtriya Ispat Nigam and NMDC - will buy the Tete East project and the Benga mine, which will give it captive coal mines. Rio Tinto had bought these assets as part of acquisition of Riversdale Mining Limited in 2011.

The assets acquired by ICVL include Benga (65%) and the Zambeze (100%) and Tete East greenfield coal assets which have substantial resource of coking coal, according to an ICVL statement today.

The coal mine at Benga produces prime hard coking coal and thermal coal and the production of the operating coal mine can be expanded to 12 Mtpa from the current 5 mtpa.

The transaction is expected to close in the third quarter of 2014.

During the transition to the new owner, Rio Tinto will continue to manage the mine to the highest safety and environmental standards. Rio Tinto's other assets in the country are unaffected by this transaction, it said. Investec Bank PLC, London was the financial advisor to ICVL in this acquisition.

The coal mine and assets are located strategically in the prime coking coal bearing region of the Moatize Coal Basin which is stated to be the second largest coal basin in the world after the Bowen Basin in Australia.

SAIL and RINL are both increasing their capacity to 23 Mtpa and 6.3 Mtpa respectively. Their requirement of coking coal would increase to a level of about 25 Million tonnes by 2015. Besides, NMDC is in the process of setting up a 3 Mtpa capacity integrated steel plant at Nagarnar in Chhattisgarh. The acquisition would help these companies to secure raw material for their expansion.