India Looks To Southern African Acquisitions To Shore Up Coal Supply

Indian companies are plunging billions of dollars into Southern African coal projects to firm up supply as India’s coal mining sector struggles to meet domestic demand. This puts Botswana, Tanzania, South Africa and Mozambique into the spotlight.
 
Oct. 1, 2012 - PRLog -- Tata Power, the Indian conglomerate, said it was considering an investment in the coal and power projects of Ncondezi Coal, a UK-listed junior exploration firm, among other opportunities in southern Africa and Mozambique in particular.


“We have been approached by banking groups, but we haven’t taken a view yet,” said Nandkishore Menon, senior project manager for Tata Power’s southern African subsidiary. “But we’re looking closely in Mozambique.”

Ncondezi Coal said earlier this month it had received positive results from a prefeasibility study into a 1,800MW power plant for Mozambique that would be supplied in its first phase by 1.5Mtpa in coal from its Ncondezi Coal project in Mozambique’s Tete province. It’s proposed that the power plant would generate 300MW at a capital cost of US$508M, scaling up to 1,800MW and consuming 7.5Mtpa at a capital cost of $2.25B.

Ncondezi Coal added it was seeking a strategic partner to help finance the projects and was willing to cede control of the power plant which had already received the support of the Mozambican government. A definitive feasibility study on the coal mine was due in the fourth quarter.

A potential investment by Tata Power would add to existing Indian involvement in southern Africa’s coal sector following the $115M takeover of Toronto-listed CIC Energy Corp by Jindal Power & Steel. CIC Energy owns the 6Bt Mmamabula coal project in southern Botswana.

Jindal also planned to build a power station for Botswana which has identified demand for 1,200MW, and has outlined plans for a further 1,200MW in the next five years. Jindal said it would build a mine and 300MW power plant spending $700M in the process.

Jindal Steel & Power’s bid was almost double that of JSW Energy’s $400M bid just over a year ago. JSW Energy controls South African Coal Mining Holdings which recently said it had short-listed a number of black-controlled investors in that company.

Meanwhile, JSW Energy said it was finalising a memorandum of investment ahead of establishing potential coal mining operations in South Africa’s Limpopo province.

But the Indian investment interest in small to mid-tier coal mining caps doesn’t end there. It seems the low thermal coal prices are stretching the bank balances of the junior miners and near-production firms, creating opportunities for strategic investment.


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