Jindal Steel buys 10% stake in Gujarat NRE's Aussie subsidiary

JSPL paid close to $2.5 mn through its Mauritian subsidiary

Jindal Steel, through its Mauritian subsidiary, has bought 10% stake in Gujarat NRE Coking Coal (GNM) for close to $25 million.

Jindal Steel paid $0.25 per share for 10 crore shares of GNM, which was a 48% premium to GNM’s closing price of $0.17 per share on May 25. Apart from the stake sale, the two signed off-take agreement over 10 years supply of 5 million tonne of coking coal for Jindal Steel’s India operations. GNM said, “Off take agreement over 10 years for a total of 5 million tonne based on an annual offtake of 5 lakh tonne of run of mine (ROM) coal with the option for additional quantity of 5 lakh tonne at benchmark linked price.”

Australia-based Gujarat NRE Coking Coal Ltd owns and operates two premium quality hard coking coal mines required in steelmaking. The company is majority owned by India-listed Gujarat NRE Coke Ltd.

The deal is expected to be completed by May 30, 2012.

This is not a huge investment by Jindal Steel but is in-line with the company’s strategy to pick-up stakes in companies that can offer raw material security. Sushil Maroo, director (finance), JSPL told Business Standard, “This investment is part of our policy to secure coking coal supplies.”

Arun Kumar Jagatramka, executive chairman of Gujarat NRE said, “This is a win-win deal for both parties, since it provides secured supply of premium hard coking coal to Jindal Steel while it diversifies the customer base of the company.”

On May 8, JSPL had acquired 9.25% stake in another Australian company Apollo Minerals for $1 million. Apollo has set a target of exploring 500 million tonne of magnetite iron ore at its Mount Oscar project in Western Australia. It is also going to make an announcement regarding its Commonwealth Hill project in South Australia.

Maroo said, “We are taking stakes in coking coal companies as a strategy but there are no more stake buys in the offing after this.”

JSPL also has a 27.7% stake in Australia’s Rockland Richfields -- another coking coal miner.