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G. Srinivasan

New Delhi, April 26 The country’s super star trading company, MMTC, is set to forge a joint venture company with Tata Steel for mining and exploration of minerals across the world. This is since the two firms can leverage their synergy in the field of mining and processing of minerals extracted from such mines to shore up domestic availability of the finished products.

Official sources told Business Line here that at a time when the world’s metals and mineral prices have been on a rollercoaster ride, benefiting several metal and mineral producers and exporters, the proposed joint venture move would help meet the demand for raw materials for the finished products industry domestically, besides augmenting avenues for third country exports.

Accordingly, both the companies would put in place an MoU (memorandum of understanding) shortly. The parent joint venture company would only be a facilitating firm with separate companies being formed for each separate project to be developed.

However, the parent company could also undertake mining activities on its own.

The sources said the joint venture would work for obtaining mining leases for exploration of minerals and other ores, precious metals and diamonds and the joint venture company would be engaged in the business identified by Tata Steel and MMTC. Asked about the structure of the proposed joint venture company, the sources indicated that MMTC would hold equity stake of maximum 26 per cent, which would be subject to the company getting prior nod from its board, shareholders and the Government.

The initial equity capital of the proposed joint venture would be Rs 10 crore, of which Rs 7.40 crore and Rs 2.60 crore would be invested by Tata Steel and MMTC respectively in proportion to their shareholding.

The joint venture company could undertake mining of various minerals, ferrous and non-ferrous ores, precious metals like gold and silver, diamonds and coal, both in India and abroad, the sources said, adding that already the first of such joint venture projects for mining of diamonds in Angola has been announced following the visit of the Minister of State for Commerce, Mr Jairam Ramesh, to Africa last month.

When contacted about the proposed venture, Mr Ramesh hoped that “the joint venture takes off quickly and pays particular attention to Africa where there is good scope for participation of Indian companies in exploration and mining of iron ore, coal, uranium, gold and rough diamonds.

“We import $10 billion worth of gold and $10 billion worth of rough diamonds every year”.

The sources added that according to the National Steel Policy of the Government of India in 2005, steel production is projected to growth to 120 million tonnes by 2020.

There is going to be commensurate spurt in requirement for raw materials in view of the increasing steel demand in the country and the recent spurt in its prices.

This would, in turn, entail exploration and development of mines, extraction and processing of minerals to be deployed as raw materials for such steel-making units, the sources said, adding that in order to facilitate this, both Tata Steel and MMTC have resolved to forge a partnership for a joint venture company.

More Stories on : Alliances & Joint Ventures | Minerals | Tata Steel Ltd

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