JSPL to start selling iron ore from Bolivian mine soon

After months of speculation that its project in Bolivia might get scuttled, Naveen Jindal-led Jindal Steel and Power Ltd (JSPL) has finally sorted out its differences with the Bolivian government.

JSPL, which has rights to El Mutun mines situated in Bolivia’s Santa Cruz area, has been allotted another 3,000 acres land, where it plans to start work on an integrated 1.7 million tonne steel plant soon.

The Indian firm will also start selling iron ore on spot basis from the mine, which has close to 40 billion tonnes of reserves.

The trading is expected to add around $300-350 million, or over Rs1,500 crore, to the company’s revenues from the first year itself.

JSPL now has 4,000 acres in possession and needs 1,000 acres more for its proposed 450 mw power plant.

JSPL’s Bolivian project was mired in controversy last year when the Bolivian government isolated the company accusing it of not investing the promised $600 million in the project. In fact, the government was contemplating imposing a fine of $800 million besides taking away mining rights in El Mutun.

Sushil Maroo, Group CFO, JSPL, told DNA Money, “Now with the land in our possession, we can start the construction work for the plant very soon.”

Till the time the facility is not operational, the company will trade in iron ore from its mine. The steel plant will be ready in 3-4 years.

An analyst with a leading domestic brokerage firm said the company is planning to sell close to 2 million tonnes of iron ore in the first year as soon as the El Mutun mine gets operational.

“They have plans to scale it up to 20 million tonnes very soon and the trading would translate into mega cash flows for the company till the time the plant is not operational,” he said.

Ravindra Deshpande, an analyst with Elara Capital, said that JSPL has access to 20 billion tonnes of reserves in the El Mutun mines and once the company’s steel plant is operational, it would consume 3.5-4 mt of iron ore per year.

“Therefore, most of it will be sold and will bring in good revenues,” he said, adding that JSPL’s Bolivian ore reserves are ten times that of SAIL in India.

Maroo said the company will invest $2.1 billion in Bolivia, which is by far the biggest investment by any Indian company in the Latin American country, over the next 8 years.

“We will have a likely debt-equity of 1.5:1 and the equity portion will be sourced from internal accruals alone,” he said.

The company also plans to set up a 6 mtpa sponge iron plant and 10 mtpa iron ore pelletisation plant in Bolivia.