Nava Bharat and Vedanta Resources Submit Final Bids to Operate Zambia's Maamba Coal Mines

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Vedanta Resources Plc (LSE:VED) (London) and Nava Bharat (Singapore) Pte. Limited, a fully owned subsidiary of Nava Bharat Ventures Limited (BSE:513023) (Hyderabad, India), have presented their final bids to operate Zambia's largest coal mines, Maamba Collieries Limited (Maamba, Zambia). The state-owned Maamba Collieries started operations in 1967 and was incorporated as a limited company in 1971 through Zambia Industrial and Mining Corporation Limited (Lusaka, Zambia). In January 2008, the government of Zambia transferred 100% stake in the coal mines to Zambia Consolidated Copper Mines Investment Holdings (ZCCM) (Lusaka).

ZCCM invited bids from domestic and international companies to revamp operations of Maamba Collieries and also to build a 300-megawatt (MW) to 350 MW power plant. It is estimated that the power plant will take about three years to build. The company, with plans to invest more than $12 million to improve the technology and operations of the coal mines, also offered an equity stake to the selected bidder. The company indicated that the percentage of equity stake was not finalized and will be decided on the basis of the value addition the selected bidder will bring to the mining operations. More than 10 companies, including Vedanta Resources, Londoloza Resources Corporation (Moikloof, South Africa), Aldwych International (London) and Nava Bharat submitted bids. In October 2008, Nava Bharat and Vedanta Resources were shortlisted, after which both companies made technical and financial offers.

According to recent reports, the Maamba coal mines, located 350 kilometers from the capital Lusaka, have more than 78 million tons of proven coal reserves. The coal mines consist of two open cast mines in the Izuma and Kanzize basins. It is estimated that these reserves have been present for more than 70 years and more than 1 million tons can be produced from these mines annually. The mining operations include a coal processing plant, pump station, water treatment unit, weigh bridges, engineering workshops and allied infrastructure. Maamba Collieries supplies coal to cement, chemicals and breweries sectors and also exports to neighboring African nations. It is also the principal coal supplier to Mopani Copper Mines Plc (Mufulira, Zambia) and Konkola Copper Mines Plc (Chingola, Zambia).

Vedanta Resources is the majority stake holder in Konkola Copper Mines and is Zambia's largest copper producer. Mopani Copper Mines is a joint venture company with First Quantum Minerals Limited (TSX:FM) (Vancouver, Canada) holding a 44% stake, Glencore International AG (Baar, Switzerland) having 46% equity and ZCCM holding the rest. In the 1980s, the Maamba Coal Mines produced more than 600,000 tons per year, but the production capacity gradually declined to 100,000 tons per year because of undercapitalization, the lack of efficient mining technologies and operational losses. In 2007, mining operations were suspended indefinitely when the fleet of dumping trucks belonging to Bell Equipment Company (Kitwe, Zambia) and leased to Maamba Collieries were seized as a result of nonpayment of dues. While the issue was solved out of court and the government promised new equipment, it became imperative to optimize the mining operations and increase profits.

Industry experts indicate that demand for power in Zambia has increased after the development of new industrial projects. Power to households is rationed and diverted to copper and cobalt mines, which are scaling down production because of the lack of sustained power supply. The country generates about 772 MW of power annually for a demand of about 1,600 MW. With consumption expected to touch 2,500 MW in the next five years, revamping the Maamba Coal Mines may help the country overcome its electricity deficit.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.