JSPL to buy Canada's CIC Energy for $115 mn

The deal would provide JSPL access to CIC's 2.6 bn tonnes of high quality thermal coal in Botswana

Steel major JSPL is likely to acquire Canadian coal firm CIC Energy for about $115 million (over Rs 600 crore) and a binding agreement for the acquisition will be signed in next few weeks.

"The two companies are going to sign a binding agreement for the deal in next few weeks. The deal value is about $115 million and it is outright purchase of CIC Energy, amounting to 100% stake," a source in the JSPL said.

When asked, a company spokesperson declined to comment on the proposed deal.

The deal would provide the Naveen Jindal-led firm access to CIC's 2.6 billion tonnes of high quality thermal coal in Botswana, which will ensure long-term fuel security to JSPL's power ventures, including that of subsidiary Jindal Power.

Shares of CIC has shot up by about 10% to CAD 1.550 per share on the Toronto Stock Exchange since July 18, when the Canadian firm confirmed that it was in talks with JSPL for selling a controlling stake.

CIC had said that it is in advanced stages of discussions with JSPL for selling controlling stake of the company at an indicative price of CAD (Canadian Dollar) 2 per share, although it did not specify how much stake will be bought by the Indian firm.

JSPL, together with Jindal Power, has chalked out an ambitious target of having more than 25,000 MW electricity generation capacity by 2020 and the deal would provide the company a long-term source of coal.

Moreover, it may also take JSPL into coal trading as it already has coal mines in Indonesia, Australia, Mozambique and South Africa.

Earlier, CIC Energy's talks with JSW Energy, a group firm of JSW Steel and promoted by Naveen's brother Sajjan Jindal, had failed in June, despite having an exclusivity agreement.

The development comes just a few days after JSPL terminated its $2.1-billion mining project in Bolivia, which included 40-years mining rights to El-Mutun mines -- considered as one of the largest untapped iron ore mines in the world.

The Canadian firm has a mining-cum-power complex called Mmamabula Energy Complex in Botswana, Africa and its Mmamubala coal field is estimated to hold 2.6 billion tonnes of high thermal coal, mostly above 6,000 kcal/kg of calorific value.

According to the company website, CIC is working to begin production in next 3-4 years and thereafter, it will export up to 24 million tonnes of coal per year from the Mmamabula coal field.

The Canadian firm is also developing a coal-fired power plant and a coal-to-hydrocarbons project.