Tata's coalfield JV in Mozambique reports 58% jump in reserves

At a time when steel companies are scrambling for captive raw material resources, Tata Steel's joint venture for coal with Australia-based Riversdale Mining, has seen an increase of 58 per cent in reserves.

After several months of exploration and drilling, inferred resource in the Benga licence area has been found to be 1.9 billion tonnes compared with 1.2 billion tonnes as announced last November.

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Tata Steel has a joint venture with Australia-based Riversdale Mining for Mozambique fields

Reserves in the Benga licence area has gone upto 1.9 billion tonnes compared with 1.2 billion tonnes as announced last November

The Benga licence near Tete in Mozambique, covers an area of 4,560 hectares, and is jointly held by Riversdale and Tata Steel.

In an intimation to stock exchanges, Riversdale has informed that the potential coal products after beneficiation which could be produced from Benga include hard coking coal and a secondary thermal coal product.

Under the terms of the agreement, Tata Steel acquired a 35 per cent interest in two of Riversdale's key Mozambique exploration tenements, including the Benga licence, as well as offtake rights to 40 per cent of coking coal produced on commercial terms.

Tata Steel plans to supply hard coking coal from the project to its Corus facilities in the UK and Europe and also to the company's enhanced requirement in India in the future.

Tata Steel's current capacity in India stands at five million tonnes, which would increase to 6.8 million tonnes by June. The Tata Steel group's capacity is 28 million tonnes.

The company's Indian operations meet 70 per cent of its coking coal requirement through captive mines. Tata Steel has two collieries in West Bokaro and Jharia in Jharkhand.

However, with Corus, the coal security stands at 15 per cent. Industry sources said, the Mozambique project would help reduce the cost of production for Corus, given that raw material prices were soaring.

Coking coal contracts, which steel mills negotiated at $94 per tonne, last year were being settled now at 200 per cent higher. As a result, steel mills across the globe were striving for captive sources.

Tata Steel has set a target of achieving a 60-80 per cent raw material security for the group in phases. According to a recent analyst meet presentation, production from the Mozambique coal projects was expected to commence from 2010.

Coking coal apart, Tata Steel has entered into joint ventures for iron ore in Ivory Coast and a limestone project in Oman. In the domestic market, Tata Steel and government-owned Steel Authority of India (SAIL) have entered into a 50:50 JV. for coal mining.