Aluminium producer National Aluminium Company (Nalco) has said that it plans to acquire around a 25% equity stake in MEC Coal by March 2012.
The value of the transaction has not been disclosed.
Nalco has shortlisted MEC Coal for supplying eight million tons of coal per annum (mtpa), of which 4.5 million tons will be used in Indonesia while the remaining coal will be used in India, a member of the company's board of directors told mydigitalfc.com.
"To secure the steady supply of coal it is important that we buy a stake in the company so that the contract is not cancelled mid-way," added the official.
The company is currently conducting the due diligence for deciding the valuation, reports Financial Chronicle.
MEC Coal won the Nalco contract after beating Bumi Muara Prasada. Under the terms of the contract, MEC Coal will supply coal for Nalco's Rs 18,000 crore aluminium / power project in Kalimantan, East Indonesia.
PT Tekno Orbit Persada, a subsidiary of MEC Coal, has a mining concession containing joint ore reserves committee (JORC) compliant resources of 1.5 billion tons of environmentally-friendly coal.
Nalco had to hold back its third phase expansion plans as it could not acquire mining leases for the Pottangi bauxite deposit in Orissa, India.
The bauxite deposit has reserves of 75m tons and Utkal-E coal. Nalco will invest a total of Rs 6,500 crore for the third phase of the expansion project.