Jindal Steel and Power (JSPL) is about to lose mining rights at the world’s largest iron ore site, Al Mutun Bolivia, as the Naveen Jindal-led company has failed to make the necessary investments in the mine as per a contract signed with the Bolivian government in 2007.
The Bolivian government’s mining and metallurgical ministry has also initiated the process to encash JSPL’s $18 million performance bond as the company failed to honour its contractual obligations.
Bolivia and Jindal had, in 2007, signed a joint venture agreement to invest $2.1 billion in the mines, which have a total reserve of 40 billion tonne of iron ore. The Indian steelmaker was supposed to invest $300 million every year for five years and $200 million over three years after that.
It was allowed to mine 20 billion tonne and had the approval to export 10 billion tonne of iron ore. Under the contract, JSPL was to build a 10 million tonne per annum (mtpa) pellet plant, a 6 mtpa sponge iron plant, 1.7 mtpa steel plant and a 450 mw power plant.
The Bolivian government was allowed to cancel the contract and
enforce an $18 million performance bond on JSPL if the company fails to kick- start the project as per schedule. The government is now exercising the right.
In December last year, the Bolivian government had asked JSPL to honour its commitment and begin mining. On December 31, 2009 Bolivia’s vice-president Alvaro Garcia Linera said, “We see that there’s a delay in the investments. We trust JSPL will understand that it has to respect its commitments. We’re demanding fulfillment of those commitments.”
Sushil Maroo, director (finance), JSPL, however, denied any such move by the Bolivian government. He said, “There is nothing like this.” He did not give any further detail about the project.
Bolivia has twice rejected JSPL’s demands for alterations in the JV deal. The company said it will invest $812 million as against the contracted $1.5 billion in the first five years. It said the Al Mutun reserves had high phosphorus content, which was pushing up the investments needed to improve the quality of iron ore. The Bolivian government has also rejected JSPL’s proposal to subsidise natural gas to run the steel plant.
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