Posco’s India plans hit a wall
The world’s third-biggest steelmaker by output, Posco, which is to invest $162 million to buy a 24.5% stake in an Australian iron ore mine, may be on a high. Not so in India, where its plans have been scuppered by the Orissa High Court which hasrejected the state government’s recommendation to hand over the Khandadhar iron ore mines to the South Korean steel major. Pocso’s India plans involve mining a 12 million tonne iron ore project in the Khandadhar region of Orissa’s iron ore-rich Sundergarh district, for a proposed $12 billion.A local company, which had also applied for a mining concession in the region, had challenged the state government’s recommendation in the Orissa High Court. The court has asked government officials to review their decision.The petition was filed by Geomin Minerals and Marketing, one of the several companies that had applied for a share in the Khandadhar mines’ resources. Posco had signed a memorandum of understanding on June 22, 2005 for the plant. The verdict, which is most likely to be appealed in the Supreme Court of India, is expected to further delay Posco India’s project. Over the last five years, the project has been mired in one controversy or the other, over land acquisition problems and protests by local residents.Mining licenses in India are granted by the federal government in New Delhi after considering the recommendation of authorities in the state government. In January 2009, the government had recommended that the Centre grant Posco a licence for prospecting 2,500 hectares of the Khandadhar mines. To allay the situation, the government had recently stepped up its efforts and had persuaded farmers to part with around 4,004 acres of land that were needed for the project. With the court now directing the government to reconsider the claims of other applicants for the mines, and to dispose all pending applications of the petitioner within four months, one of India’s biggest foreign direct investment project appears to be unravelling.Despite the Korean firm’s major setback in India, Posco’s chief executive officer, Chung Joon Yang has said that the company plans to invest $5 billion in overseas mines. The aim is to team up against the world’s largest steelmaker, ArcelorMittal, in securing raw material to combat price swings. Tying up deals for new sources of raw material has been on the cards for some time now. Posco’s Australian unit has also increased its shareholding in Perth-based Murchison Metals to 13.91%, in its bid to become the iron ore miner’s largest shareholder.Posco’s deal with the Australian Premium Iron Ore mine in Pilbara, Western Australia, has been inked keeping in mind that the mine is expected to produce an estimated 40 million tonnes of iron ore annually starting from 2014. This will enable the Korean firm to secure 9.8 million tonnes of iron ore a year. Posco is to buy its stake from American Metal and Coal, whose holding will reduce to 25.5%. Aquila Resources is to retain its 50% stake in the project.