Lanco to invest Rs4,000 crore in Griffin mines

Infrastructure major Lanco Infratech is likely to invest up to A$900 million (about Rs4,000 crore) on strengthening its recent Griffin coal mines acquisition in Australia.

The company is said to be still working on a blueprint for improving the activity at the mines and the infrastructure around them before ramping up the capacity from the existing 4.5-5 million tonne to about 15 million tonne.

“We should have the exact details of the capital expenditure and the final plan for expansion in a month’s time,” Suresh Kumar, Lanco’s CFO, told DNA. But he did not disclose the details of the capex plan.

However, sources said that the upper limit for the capex could be A$900 million, “though there is a possibility of the expenditure remaining lower than that”.

The company on last Friday completed the acquisition of the Griffin coal mines in Western Australia for A$750 million. The coal division of the Griffin group has been in voluntary administration since January last year, after the group missed debt repayment deadlines. It was estimated that creditors were owed around A$742 million.

The A$750-million acquisition by Lanco was the largest investment by any Indian enterprise in Australia to date. 

There were 16 suitors for acquiring the mines including another Hyderabad-based infrastructure major GVK.

In addition to ramping up production, Lanco is all set to focus on improving the infrastructure around the mines for better supply logistics. Improving the port and rail networks for transporting coal from the mines to various destinations is a part of the plan.

Lanco also plans to strengthen the rail corridor between the Collie coal mine and Bunbury, which would enhance cargo movement around the region.

“There were several operational issues faced by the earlier management including those with the workers’ union. Lanco would now focus on sorting out those issues while improving the mining and logistics condition for maximising the opportunity,” the company said.

In fact, Lanco had earlier said that the acquisition would also bring in significant savings with the cost of the coal at Griffin estimated to be at about A$80-85 as against the current market price of A$115-120.

Of the 4.5 million tonne being produced from the mines currently, about 3 million tonne is being sold in the Australian market including 2 million tonne to a power plant wholly owned by Griffin.

Another 1 million tonne is being supplied to other Australian companies including a few cement companies.

Meanwhile, reports in the Australian mediam, quoting Lanco’s chairman L Madhusudan Rao, said that the company was committed to long-term development of the business.

“We believe these development plans and additional investments will support significant growth opportunity, economic development and employment generation in the region.”