Gujarat NRE to Raise $100 Million to Develop Australian Coal Mines

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Researched by Industrial Info Resources (Sugar Land, Texas)--Gujarat NRE Minerals Limited (Illawarra, Australia), the Australian subsidiary of Gujarat NRE Coke Limited (BOM:512579) (Calcutta, West Bengal), has announced plans to funds between $50 million and $100 million through a mixture of equity and debt to develop and enhance the production of its coal mines in Australia. The company is considering raising funds in the current fiscal year through convertible bonds or by means of equity placement to investors. It further plans to initiate significant expansion activities at the mines to boost production levels to 7 million tons per year from the present 1 million tons per year over a period of four years. This is estimated to require an investment of $450 million, most of which would be raised through internal accruals during the said period.

In December 2004, Gujarat NRE Coke acquired the NRE No. 1 Colliery, formerly known as South Bulli Colliery, located in the southern coalfields of New South Wales, with estimated reserves of 300 million tons. A year later, the mine began commercial operation with an initial production of 1 million tons per year. Over the next couple of years, the company undertook significant refurbishments of its mining infrastructure, and the mines have begun daily production activities. The firm is also developing the Wonga Mains conveyor roadway to further increase production levels to 4 million tons per year.

In mid-2005, Gujaret NRE acquired the Avondale Colliery and consolidated it with the neighboring Elouera Colliery, which it acquired toward the end of 2007. These mines are now collectively known as the NRE Wongawilli Colliery. In January 2008, the firm loaded 20,000 tons of coal in its first shipment of coking coal from these mines and dispatched the shipment to India. It also announced plans to invest $65 million to enhance coal production at the Wongawilli Colliery to 2.5 million tons per year by 2010-11. For more information, see related July 31, 2008, news article - Indian Power, Cement and Steel Majors Scout for Overseas Coal Acquisitions. A new continuous miner recently procured from engineering group Sandvik Mining and Construction (Leoben, Austria) is expected to further boost production levels at the mine.

Gujarat NRE recently announced that both of its mines are likely to begin mass producing coking coal in the current fiscal year. The company is also nearing completion of background studies of both mines to ensure the compliance of development applications with the planning regulations of New South Wales. The firm's acquisition of these mines, which have reserves of more than 500 million tons of metallurgical coal, is being viewed as a strategic move to lock in reliable coal supplies. The captive mines will also enable the company to fend off the impacts of price fluctuations, as coal prices have been increasing because of a significant supply-demand gap worldwide.

Gujarat NRE is India's largest noncaptive producer of low-ash metallurgical coke and is also the only Indian company to own coking coalmines in Australia. It recently announced that it would set up a 1 million-ton-per-year coke plant with a cogeneration power station and coal washery in Andhra Pradesh. The firm also has a significance presence in the wind sector with an installed capacity of 27.5 MW in India. It owns and operates 22 windmills in Kutch, Gujarat, and plans to add 20 more to ramp up its power generation capacity to 87.5 MW.

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