The Hindu Business Line : Steel majors scout for mining opportunities in Africa

Plans afoot
Tata Steel is setting up a ferro-chrome plant in South Africa for $120 million.
Aditya Birla Minerals and Global Steel Holdings have plans for investment in coal mines in Nigeria.
Essar Steel also scouting for steel mills and mining opportunities.

Mumbai , Dec. 30

Major steel companies, including SAIL, Tata Steel, Aditya Birla group and Vedanta Resources, have sent their geologists and experts to explore the possibilities of mining iron, coal and copper deposits in Africa, says an NCDEX report on steel sector.

Biggest investment

Tata Steel is setting up a ferro-chrome plant in South Africa for $120 million and is in the process of bidding for mines in Tanzania that will need an investment of about $1 billion. Aditya Birla Minerals and Global Steel Holdings have plans for investment in coal mines in Nigeria and Essar Steel is scouting for steel mills and mining opportunities in Africa, the report said.

The biggest global investment till now has been of Vedanta's Resources, which has invested $50 million to buy Zambia's biggest copper mines and is investing another $400 million in a deep mining project.

The group is also on the verge of finalising acquisition of a copper mine in Congo for $2 billion.

Tata Steel is planning to invest Rs 450 crore in a new 5-lakh-tonne smelting plant at its Thai subsidiary, Millennium Steel, to fully integrate its production line in Thailand. Tata Steel owns 40 per cent in Millennium Steel and the investment will cut cost by 10 per cent. The smelter is expected to begin operations in 2007.

Trebles in 5 years

According to the Australian Bureau of Agriculture and Resource Economics report, foreign investments in the mining industry have more than tripled in the last five years and are projected to rise further to peak in 2007-08, providing further upside for mining service companies.

"Iron ore and coal constitute almost 70 per cent of the total cost of producing steel. It is also applicable in the case of other non-ferrous metals like copper and aluminium. Africa is a more preferred destination as it has fresh reserves of minerals and low cost of operation," said Mr Rakesh Yadav, a steel analyst with private broking firm.

Global reserves

Owning about 35 per cent of global mineral reserves, Africa could be the main ore supplier for Indian companies. Estimates say the African continent has 15 per cent of the world's iron ore reserves, 17 per cent of copper, 38 per cent of uranium and 43 per cent of bauxite reserves.

According to a study by global consultant PricewaterhouseCoopers, global mining players had a spectacular year in 2005 with investment increasing by about 30 per cent and profits by 60 per cent.

According to the Minerals Council of Australia, outlook for the metal and mining industry looks bright with mineral prices establishing a new high in the coming 3-5 years riding on the back of strong fundamentals.

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