One of the world’s largest coal mining companies, Coal India (CIL), is in talks to acquire two undisclosed Australian firms for over INR230bn ($4bn).
This move is part of the state-owned company’s strategy to acquire international assets to overcome domestic market mine start-up delays and boost production.
India is currently facing severe a shortage of coal, prompting the goverment to consider imports.
CIL has already sent proposals to acquire majority stakes in these firms for $2bn each to its foreign acquisition committee.
CIL expects that the deal will allow the company to import about 28 million tonnes of high quality thermal coal annually.
A coal ministry senior official told The Economic Times that following the committee’s approval, the proposals will be taken forward to the board and then CIL will be ready to acquire the assets.
"The entire process is likely to take at least three months because CIL will conduct a due diligence through its merchant bankers on the assets to make sure the return on investment is in stipulation with the government norms," he said.
With steep drop in coal and iron ore prices globally, several international assets are being put up for sale in Australia, the US, Africa, Mozambique, Chile, Columbia and Indonesia.
Thermal coal prices have declined by more than 25% on average since the beginning of this year, which propelled several mining companies to halt production, reduce output and lay off workers.
Coal India, which considers this is an ideal time to acquire overseas coal assets, has received 32 proposals from foreign mines this year.
CIL chairman S Narsing Rao told the publication; "If we delay the process the assets offered to us may not be available after some time because these companies also have the compulsion of engaging with other parties for selling them."
CIL contributes around 85% of coal production in India.
Image: A slump in coal prices and rising production costs have propelled several mine companies across the world to sell assets. Photo: Courtesy of Dan / FreeDigitalPhotos.net.