ICVL terms not buying coal assets a 'blessing in disguise'

However, current international coal prices are now viable for the company to go all out for a global coal block asset, the company Chairman says

Formed in 2009 by five public sector companies, namely; SAIL, NTPC, RINL, Coal India and NMDC, the books of International Coal Ventures Ltd (ICVL) are still devoid of a single coal asset. CS Verma, chairman of SAIL and ICVL, says, given the meteoric rise in coal prices, this has been a ‘blessing in disguise’.

In an interview with Business Standard, Verma said coal prices in the last three years shot up to over $350 per tonne and are now roughly half of it. “Not buying coal assets abroad has been a blessing in disguise to us,” he said. However, ICVL now believes that the current coking coal prices are “reasonable” and an all-out effort to acquire a coal asset abroad is being underway. He said, “We are quite bullish on the current market condition of coal and now we have taken up, in a very serious manner, the due-diligence of four properties and I am hopeful that in the coming months we should be able to finalise a deal.”

Australia and Mozambique still remain the geographies to scout for coal assets.

It is not that ICVL did not try to buy coal assets in the last three years. Its inability to take faster actions, and the red-tape involved in the public sector companies did not allow it to buy coal mines. This, the joint venture, is now calling a ‘blessing in disguise’.

An analyst with a domestic brokerage covering the mining sector, said, “Coal prices have been very volatile over the last 3-4 years. From $125 per tonne they shot up to $375 per tonne and are now back to $150 per tonne levels. It is good that ICVL couldn’t buy any mine as the valuation of the assets would have straightaway halved by now. However, they need to regroup and be swift in their actions now.”

The slow process is not the only issue plaguing ICVL. The agenda and the partner companies, too, don’t seem to be in sync. ICVL was formed only to look into coking coal assets abroad. Coking coal is an essential raw material in producing steel. Yet, companies like Coal India and NTPC joined hands with the other three to form ICVL.

SAIL and RINL are steelmakers while NMDC is India’s largest iron ore miner which is also in the process of setting up its own steel plants.

This is the reason that NTPC and Coal India signalled their exit from the joint venture. While NTPC is on its way out, Coal India continues to remain a part.

Verma accepted the fact that NTPC is on the verge of quitting the joint venture. The power generator isn’t part of board-meetings of ICVL, now.

At one point in time, private steelmakers did show some interest in joining ICVL to scout for coking coal mines abroad together. However, Verma is quick to point out that ICVL is a public sector enterprise and will remain so. He said, “We will not induct a new company in place of NTPC but will restructure our shareholding pattern. ICVL has been formed by the public sector companies and remains a domain of the same. We will not induct any private sector company in it.”