Major Indian steel company readies plans to scrap huge mining project in Bolivia
India's Jindal Steel & Power said on Saturday it was making plans to scrap a 2.1 billion dollars steel project in Bolivia, saying the Bolivian government had not met contract terms that include supply of natural gas for the project.
The steel and power producer said it had served its intent to terminate the contract and the Bolivian government had 30 days to resolve the issues.
“Jindal Steel Bolivia has sent a letter to government of Bolivia, on June 8, conveying its intention to terminate the contract for investment of 2.1 billion dollars, due to non fulfilment of the contractual obligations on the part of Bolivian government,” the company said in a statement. The company said it was the single largest foreign investment in the country.
Jindal Steel & Power had signed a joint venture contract with the government of Bolivia, in 2007 to invest 2.1 billion for setting up an integrated steel plant of 1.7 million tons per annum (mtpa) capacity, including ore mining, pelletization (10 mtpa) and DRI (6 mtpa).
In case government of Bolivia comes out clean and informs as to how much gas it can actually supply and agrees to reconfigure plant capacity and investment and amend the contract JSPL can consider staying back, a Jindal Steel statement said.
However, the government of Bolivia is now willing to commit only 2.5 MCD of gas (as against total requirement of 10 MCD) from 2014 onwards due to non-availability of gas in the country, it said, adding that the company is being asked to make investment as per capacities originally envisaged under the contract.
It added that the Bolivian government did not provide substantial land for the project until 2010 and, therefore, work on the project could not start early. Till date, full land required for the project has not been provided by them.
The project was a jewel for JSPL. The largest mining concession ever granted by the Bolivian government could have given JSPL a foothold in the fast-growing Latin American steel market.
The company, apart from mining 20 billion tons of ore, had the go-ahead to export half of it. And given the volatile iron ore prices, the battle between steel and mining companies to secure any possible raw material source, this resource was a major boost to JSPL raw material security.
The company had also signed contracts worth 583 million dollars with various companies, including Midrex for a 2.5-million-ton steel mill, for the project. “We are reviewing the situation and the contracts”.