India's KIOCL Selects URSIPL to Build 5 Million-Ton Steel Mill

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's state-controlled KIOCL Limited (Bangalore, Karnataka) has announced that it will build a 5 million-ton-per-year integrated steel mill in association with URSIPL (Bangalore, Karnataka), a subsidiary of United Telecoms Limited (Bangalore). The joint venture proposes to build a $1.93 billion steel processing facility in Karnataka's Bellary district. Confirming the news, K. Ranganath, the chairman and managing director of KIOCL, said that KIOCL and URSIPL would hold a 26% and a 74% stake respectively in the venture. Company officials said that KIOCL would undertake financing for the project with a debt-equity ratio of 1:2. KIOCL is likely to invest $501.8 million in the project, of which $193 million will be sourced from internal accruals. Presently, the company has cash reserves of about $257.3 million. The steel mill will have an initial production capacity of 1.5 million tons per year, which will later be augmented to 5 million tons per year.

Ranganath also indicated that the procedure for drafting the joint venture agreement is under way and is expected to be completed shortly. The joint venture is likely to be established by late 2010. As part of the agreement, URSIPL will be responsible for acquiring land in the Bellary district for the project. The state government has reportedly approved land allocation in the region. While KIOCL will provide the iron ore mining technology, URSIPL will be responsible for the technical expertise pertaining to the steel mill operations and marketing of the final products. The companies are awaiting approval from the government. KIOCL will commence with mining procedures after receiving the necessary clearances.

Established in 1976, KIOCL undertakes development of mining and allied plant facilities. The company's product portfolio includes iron ore concentrate, which finds its use in sintering and pelletization processes. The high-grade concentrate, which is low on sulfur, alumina, vanadium and phosphorus, is used in several countries, including Japan, Australia, Turkey, China and Taiwan. Earlier, KIOCL invited Expressions of Interest from companies to build the steel processing facility as a joint venture.

In a related development, KIOCL has sought approvals from the government and Supreme Court to undertake limited access mining at its deserted mine at Kudremukh in Karnataka. Estimates indicate that the abandoned mine has broken ore reserves of about 24 million tons valued at about $536 million. Experts are of the opinion that the mine's output can help KIOCL operate its pelletization plant for three years. In 2005, the Supreme Court directed KIOCL to shut down the mine in Kudremukh, citing adverse environmental impact. Before closing down the mine, KIOCL had blasted some parts of the mining area. Ranganath has indicated that the loose ore could cause greater environmental damage. Requests have also been submitted to the solicitor general of India and the law ministry for necessary approvals.

KIOCL is also planning to extract iron ore waste, which was dumped at the Lakya dam near Kudremukh. Over a 30-year period, the company dumped nearly 200 tons of iron ore waste in the dam. According to experts, about 25% of the waste can be recovered, which could yield about 50 million tons of iron ore.

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