If we get operating coking coal mine, will look at it: JSW Steel's Acharya

JSW's economic interest in the coking coal asset would be about 20 per cent, said Jayant Acharya, joint managing director, JSW Steel

Even after announcing investment in two international coking coal assets, JSW Steel may continue to sniff around for an operating mine as part of a broader strategy to beef up raw material security for a fast-expanding steel business. The caveat, however, is that it has to make “commercial and strategic sense”.

Earlier this month, JSW Steel announced acquisition of a 66.67 per cent economic interest in M Res NSW, which owns a 30 per cent stake in a joint venture formed to acquire the Illawarra Metallurgical Coal business of South32 Limited. The upfront investment for JSW is $120 million.

Illawarra Metallurgical Coal is a premium hard coking coal operating mine. Its assets include the Appin and Dendrobium coking coal mines in New South Wales, Australia. The mines collectively have a total marketable reserve of approximately 99 mt of prime hard coking coal.

“JSW’s economic interest in the coking coal asset would be about 20 per cent. This would give us 1.2 million tonnes (mt) of premium hard coking coal, which we will bring to India for our steelmaking operations,” Jayant Acharya, joint managing director, JSW Steel, told Business Standard.

“This is part of our strategy to secure premium hard coking coal quality which will give us the strength to blend other coals,” he added.

Iron ore and coking coal are two key inputs for steelmaking. While iron ore requirements of Indian steelmakers are locally met – the country being the fourth largest producer – coking coal is largely imported. About 90 per cent of the industry’s coking coal requirements is met by imports, which makes it vulnerable to supply disruptions and price volatility.

JSW Steel’s current coking coal requirement is about 14-15 mt – premium hard coking coal requirement is about 5 mt. As it increases India capacity to 50 mt by FY31, total coking coal requirement will go up to 21-22 mt and premium hard coking coal requirement will be 6.5-7mt.

In May, the JSW Steel board had approved acquisition of Minas de Revuboe Limitada (MDR), which is a pre-development stage premium hard coking coal mine project in the Moatize Basin of Tete Province in Mozambique. According to the company, it is one of the largest pre-development stage premium hard coking coal projects globally and has reserves in excess of 800 mt.

The aggregate purchase consideration for acquisition of a 92.19 per cent equity stake and shareholders’ loans of MDR is $73.75 million.

“The mine has good potential but would take time to operationalise, subject to necessary approvals. This is also a prime hard coking coal asset and would help us to secure a large majority of our coking coal in this grade,” Acharya said.

“In the meantime, if we get an operating coking coal mine which makes commercial and strategic sense, we will look at it,” he added.

In India, JSW Steel has coking coal and iron ore mines. Three coking coal mines are expected to give the company close to 2 mt once operations start. The company also has 24 captive iron ore mines having 1.6 billion tonnes of reserves across Odisha, Karnataka, Maharashtra and Goa.

On the recent ruling by the Supreme Court allowing states to recover dues retrospectively on mineral rights, Acharya said, “There is no demand on us.”

“Individual state taxes which were struck down have not yet been upheld by the Supreme Court,” he added. However, since the matter was sub judice, he refrained from making any further comments.