IN SEARCH OF MORE

Calcutta, March 8: Tata Steel is planning fresh acquisitions of coal and iron ore mines abroad.

“We are looking at various opportunities. You may hear from us soon,” Arun D. Baijal, group director for global mineral, said in Jamshedpur recently.

The company needs captive sources for its Corus operations in western Europe. While it acquired coal and iron ore blocks in Mozambique and Ivory Coast last year, Corus will be able to get the benefits only after three or four years when the mines are developed.

The management is now eyeing mines that are at a fairly developed stage and can be brought to production in six to 12 months.

The Tata Steel group, comprising Tata Steel, Corus, NatSteel and Tata Steel Thailand, has set a target to double return on investment in the next four years.

Captive mines will be the biggest driver if the group wants to achieve this. The group’s overall profitability will also depend on how soon it gets the captive mines.

Before Corus was acquired in 2007, 80 per cent of the iron ore and coal came from the group’s own mines. This came down to 17 per cent after the acquisition as Corus, with a 20-million-tonne capacity, did not have captive raw material sources.

Philippe Varin, chief executive officer of Corus, had said the target was to raise the availability by up to 50 per cent.

The new mines could be in Africa and Latin America, where the Jindal brothers, Navin and Sajjan, have pooled in investments.

Baijal admitted that the global spurt in prices of iron ore and coking coal would also have an impact on the cost of acquiring the mines.

Experts say companies will have to shell out much more to buy a ready-for-production mine than one which is in the exploration stage. However, they may have to spend less in the development of the mines.

European steel majors such as Corus, ThyssenKrupp and erstwhile Arcelor had sold their mine assets two decades back as mining was not considered to be a core business area.

Baijal said he expected iron ore prices to remain firm. But there was a possibility of coal prices coming down.

“If China continues to grow the way it is and there is consolidation in the mining industry, iron ore prices will not come down,” he said.

Coal prices are likely to soften after local issues such as rain and port congestion are sorted out in Australia.