New Delhi: Rio Tinto, the world’s third largest mining company, will invest in a $2 billion iron ore project in Orissa to supply clients in India and overseas with the steel making material, Sam Walsh, head of the company’s Australia-based iron ore division, said on Monday.
The project will be the largest investment by an Australian firm in India, Walsh told reporters on the sidelines of the Australia-India Chief Executive Officers’ Forum in New Delhi.
“We expect to ramp up (production) quickly to 15 million tonnes (mt) per year,” said Walsh. “We will bring the technology and environment safety systems and will obviously be using local people in the project.”
Total foreign direct investment (FDI) from Australia from April 2000 till December 2011 stood at $486.5 million, just 0.3% of the country’s total FDI flows, according to trade ministry data.
India’s mining companies have found it difficult to expand to keep pace with the rising demand, hampered by opposition from displaced locals, stringent environmental norms and a slow process for getting approvals.
In response to a question on whether Rio’s plans would be affected by the fact that South Korean steel giant Posco’s plans had run into trouble with locals protesting against plans for a $12 billion captive power-cum-steel plant, Walsh said, “I am a very patient man. We will go through all the processes needed to bring this project on board. We are already working with local communities.”
Rio Tinto owns 51% of the project, according to the website of partner Odisha Mining Corp., which holds 44%. The remaining 5% is owned by NMDC Ltd, India’s biggest iron ore producer.
“Foreign companies are looking ahead to opportunities opening up in the Indian mining sector, especially as there is a new mining policy on the anvil,” said a Delhi-based steel and mining consultant who requested anonymity. “Rio Tinto has been in India for many years and is engaged in exploration and reconnaissance projects and is looking for mining leases. It is not surprising, therefore, that it is seeking to strengthen its position by announcing this investment.”
India’s steel ministry in November estimated local demand may grow at 9% a year over the next five years. While Tata Steel Ltd and Steel Authority of India Ltd own iron ore mines, JSW Steel Ltd buys as much as 80% of its needs from local and overseas suppliers.
With expectations of significant infrastructure and industrial growth in India, Rio Tinto remains keen to contribute to the development of the Indian iron ore sector, Rio Tinto said on its website.
A separate venture between Rio Tinto and NMDC was stalled in 2010 after the companies failed to make headway because of a lack of synergy, Rana Som, the then chairman at the Hyderabad-based company, said on 21 December.
India’s iron ore output may tumble 50% this year from 226mt mined in the year ended 31 March after the government raised levies, R.K. Sharma, secretary general at the Federation of Indian Mineral Industries, said on 2 January. The country’s total recoverable reserves are about 7.06 billion tonnes, according to the Indian Bureau of Mines and Federation of Indian Mineral Industries.
Meanwhile, India is seeking a say in deciding the price it pays for coal imported from Australia, so far decided on the basis of negotiations between that country and Japan, one of the largest importers of Australian coal.
This was among the issues discussed at the CEOs’ forum that also focused on fast-tracking a bilateral trade pact, establishing direct air links between the two countries and even a prime ministerial visit from India to give a boost to commercial links.
“When we buy coal from Australia, we are relying more on how Australians are negotiating with the Japanese,” said Naveen Jindal, member of parliament and chairman and managing director, Jindal Steel and Power Ltd. “Historically Japan was consuming a lot more (coal) than us. But now since our requirements have increased and are going to further increase as we are going to be producing a lot more steel than Japan, we have to take that dominant role in the negotiation for coking coal and even thermal coal for meeting our energy requirements,” Jindal, co-chair of the CEOs’ forum, told reporters.
[Source – Livemint]