The Hindu Business Line : Gremach in talks to sell stake in Mozambique arm

Mumbai, Oct. 1 Gremach Infrastructure, which has struck coal in Mozambique, is in advanced stage of talks with an Indian steel producer and three foreign mining and steel companies for 5 to 10 per cent equity sale in its Mozambique mining arm, Osho Gremach.

Osho Gremach, which owns 75 per cent stake in the Mozambique coal mines in Moatize region, plans to start coal production from the mines by April 2009.

Gremach expects to raise $50 million through equity dilution, which will be utilised to buy mining equipment and start production at the Mozambique facility.

Without naming the Indian steel maker that is in the race to pick up equity in the mining company, Mr Rishi Raj Agarwal, Vice-Chairman and Managing Director of Gremach, only said it was a “big steel maker in the private sector.”

Indian steel companies such as Tata Steel, Jindal Steel and the Mittals have been looking for buying coal and iron ore mines outside India to meet their raw material security needs. Tata Steel recently acquired 35 per cent stake in Australian firm Riversdale Mining coal project in Mozambique for about $ 85 million. India is estimated to be importing nearly 95 per cent of its coking coal requirement.

Earlier, Gremach was planning a bigger equity dilution to raise about $100 million, but as the Mozambique mine turned out to be an open cast one, it decided to whittle down the quantum of dilution. “We expect to complete the process of equity dilution in the next three months,” Mr Agarwal told Business Line.

Drilling operations

The company was granted 11 prospecting licences in Mozambique last year, covering over 13,500 hectares. Out of this, it undertook drilling operations in two licences, where they have stuck coking coal in depths of barely 1.5 mts. This region falls in Karoo basin that is recognised as a prime coal bearing area in Africa—the basin starts from South Africa and travels up to Kenya, covering parts of Mozambique, Zimbabwe, Swaziland, Malawi and Tanzania.

“Our licences are very close to the existing Companhia Vale Do Rio Doce mines, where hard prime coking coal has already been found. We estimate the two licences to hold a reserve of 200 million tonnes of coal. The international price of coal is at present ruling at about $300 a tonne,” Mr Agarwal said.

Companhia Vale, the world’s largest iron ore producer, is investing $2 billion in Mozambique that is expected to develop into the Southern Hemisphere’s biggest mine for the black gold.

After it starts coal mining operations, Gremach will be looking at both the Indian and global markets. “After the Mozambique strike, we will be looking out for both coal and iron ore mines in Africa, CIS countries and Latin America,” Mr Agarwal said.

The group already has a company in Guinea, which has a string of licences for iron ore blocks, bauxite, lead and uranium, measuring a total of about 8,000 sq km. Gremach clocked an income of Rs 235.62 crore and net profit of Rs 37.17 crore last fiscal.

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