NMDC's due diligence on coal mine in Indonesia almost done

NMDC's due diligence on coal mine in Indonesia almost done

Iron ore miner NMDC has almost completed due diligence for a thermal coal mine in Indonesia owned by Shree Renuka Sugars, which it plans to buy primarily for trading purposes.

"Due diligence on the asset owned by Indonesian stock exchange-listed PT Renuka Coalindo Tbk is almost finished and the report is likely to come by the end of the current month," a senior NMDC official said.

After evaluating the due diligence report, officials of the state-owned company will visit the mine in Jambi province of Sumatra for a first-hand assessment and based on their feedback, a decision on the acquisition will be taken, he said.

Shree Renuka Energy, a Shree Renuka Group company, owns the mine through its listed subsidiary PT Renuka Coalindo Tbk.

The concession for the Jambi Prima Coal Mine, spread over 1,000 hectares, was acquired by the company in 2008 and production started in April 2010.

According to Shree Renuka Energy's website, it is one of the largest coal mines in the Jambi region, with resources of 120 million tonnes. Current production of 1 million tonnes of coal per annum is expected to be ramped up to 5 million tonnes a year by 2016-17.
"NMDC does not need thermal coal at this point of time. The acquisition is mainly for trading purposes and not for internal consumption. India needs a lot of thermal coal. The acquisition is aimed at minimising the supply deficit," the official said.

However, the company may use coal from the mine after its proposed 500-MW power plant in Uttar Pradesh goes on stream in about three years. NMDC has been allocated thermal coal mines to feed these plants.

India's coal imports may rise to 185 million tonnes by 2017 amid a widening demand-supply deficit, according to the draft paper of the Planning Commission for the 12th five-year Plan.