India's SAIL Chooses Hatch for Chiria Mines Report

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Steel Authority of India Limited (BSE:500113) (SAIL) (New Delhi) has contracted Canadian engineering and construction firm Hatch (Mississauga, Ontario) as consultants to prepare a feasibility study and detailed project report for the $386.5 million development of the Chiria iron ore mines in the Indian state of Jharkhand.

The first phase of the mine development will establish a capacity of 7 million tons of iron ore per year from the Chiria mine, with the option to increase this to 14 million tons per year in a second phase of construction.

Hatch will operate from its regional and operational services office in Perth, Australia, and will submit the final development report by June 2011. Officials in SAIL's Raw Materials Division said that engineering and procurement contracts will be negotiated within two months of completion of the report's release.

SAIL has 10 mining leases in Chiria, which has estimated reserves of 2 billion tons of high-quality iron ore. The mining leases were originally with the virtually defunct Indian Iron and Steel Company Limited (IISCO) (Burnpur, West Bengal) and were inherited by SAIL when the company took over IISCO and rechristened it as the SAIL IISCO Plant. Under the auspices of IISCO, 500,000 tons of ore were extracted from the Chiria mines.

Since the takeover of IISCO Plant and mining leases, the Chiria ore reserves have been a bone of contention between SAIL and the Jharkhand state government, which refuses to acknowledge the transfer of the lease from IISCO to SAIL. The Jharkhand government had been keen to carve out the Chiria reserves and allocate it to ArcelorMittal (NYSE:MT) (Luxembourg), which proposes to invest $20 billion to construct a 12 million-ton steel plant in Jharkhand. However, earlier this year, disputes between SAIL and the state government were resolved following intervention of the Union government, and SAIL took complete control of the reserves.

Officials in SAIL's Raw Materials Division said that the Chiria iron ore reserves were critical to raw-material security for the company's expansion of capacity from 14 million tons to 23 million tons by 2013, which will entail a capital expenditure of $15 billion. The Chiria reserves are also critical to supply SAIL's Bokaro Steel Plant in Jharkhand, the capacity of which is being expanded from 5 million tons to 7 million tons.

SAIL officials said that the company is negotiating with POSCO (NYSE:PKX) (Pohang, South Korea) and ArcelorMittal to construct a steel plant near the Bokaro Steel Plant through joint ventures in which SAIL could offer both land and iron ore from the Chiria mines.

POSCO has committed to setting up a steel plant in neighboring Orissa with an investment of $12 billion, but the company has made little headway in acquiring land. Similarly, ArcelorMittal's proposal for an $8 billion steel plant in Orissa is facing delays in granting iron ore mining leases. SAIL officials said that, under the circumstances, offers for both land and iron ore will be attractive for foreign investors to enter into joint ventures with the company.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.