Against all odds: Jindal Steel & Power is awarded El Mutún iron ore project

This was a nerve-racking bidding if there ever was one: plenty of controversy, politically motivated-stalling and intrigue, clashing of regional and political interests, mining industry nationalization scares and even a faux ministerial kidnapping.

What started as a highly competitive international bidding of five foreign companies including heavy hitters Mittal Steel Group and Shandong Luneng eventually became a one-player game as other companies deserted the process – or in the case of EBX were kicked out. But now porteños are celebrating, the Bolivian government has just announced the awarding of the project to the sole remaining competitor, Indian materials and energy conglomerate Jindal Steel and Power Ltd. (JNSP.BOM, Website).

The project is expected to generate some 2,000 direct jobs in the area, and important tax revenues to the local and national government. We should also note that natural gas rather than coal will be used in the smelting process.

According to Rediff.com, a popular Indian news site, “industry sources said the Indian company would have to invest $1.5 billion over the 40-year term of the contract. The El Mutun iron ore mines, located near the Bolivian-Brazilian border, have proven reserves of 40 billion tones… the deal will also benefit the Andean country. Its government estimates it can earn about $250 million in iron ore exports every year and employ almost 2,000 people. The operations can help produce up to five million tones of steel annually.”

JSPL is the latest among Indian conglomerates hunting abroad for raw materials. Last year, the country's largest private steel producer, Tata Steel bought a five per cent stake in an Australian coal mine.

El Deber (ED) published a brief interview with Mr. Vikrant Gujral (VG) Jindal’s vice-chairman and chief executive officer, my translation follows:

ED. - What was your first reaction when the government announced the green light for your proposal?

VG. - We’ve been working on this offer for two years, and put all efforts into it, I personally traveled to Bolivia ten times during the past years, to follow the project’s progress. That’s why we were glad and because there is a great sense of responsibility to it.

ED. - What’s the 60-day pause that Jindal asked for?

VG. - That lapse forms part of the proposal requirements.

ED. - What amount of investment is Jindal planning for this project?

VG. - About $2,300 million within eight years; direct and indirect employment generated by the project will reach the thousands, we don’t have a specific number.

ED. - When do you begin operating?

VG. - We are already working; obviously, there are some legal procedures have to complete before we start operating the project itself, for instance congressional approval and once we get that then we’ll begin operating. We are opening an office in Santa Cruz to monitor all contractual procedures and paperwork.

ED. - Is it true that other companies could also start working with Jindal in the iron ore extraction?

VG. - Maybe, we haven’t ruled out that possibility, even though this project will probably generate some start-up companies in the area.

We should be relieved that, while MAS may have hijacked the process from the previous administration (and now gloats over how a “popular, originary government has finally taking upon this project”) at least they were able to garner enough reason to go with it and complete a negotiation, we hope, in Bolivia’s best interest.

Tag: South America, Bolivia, Evo Morales, mining ,Jindal.