An Indian government-backed group that won rights to mine Afghanistan’s biggest iron ore deposit has sought $7.8 billion in state aid and loans to develop the venture, two people with direct knowledge of the plan said.
India’s steel ministry backs the proposal by the Afghan Iron & Steel Consortium, which comprises seven companies led by state-owned Steel Authority of India Ltd. (SAIL), the people said, declining to be identified because details of the plan are confidential. The ministry will seek approvals from the foreign and finance ministries, they said, without giving a timeframe.
The group plans to spend $11 billion to mine the Hajigak deposit west of Kabul, build a steel mill, a power plant and transport links. The project will help India overtake China as the biggest overseas investor in Afghanistan, which the U.S. says holds $1 trillion in untapped mineral reserves, and increase its strategic presence in the war-ravaged nation.
“We have told the government that it will be difficult to raise debt for the Afghanistan project and the government should help us in getting that funding either through sovereign guarantees or any other means,” Steel Authority Chairman C.S. Verma said by telephone yesterday, declining to give details.
The group is seeking $5.5 billion of 30-year interest-free loans to fund the debt component of a planned 6 million metric ton-a-year steel plant and $2.35 billion in aid for building an 800-megawatt power plant, railway, road and power transmission lines around the project, the two people said. The seven companies will contribute about $3.2 billion toward equity in the venture, they said.
President Hamid Karzai’s Cabinet last month awarded the Afghan Iron & Steel Consortium the rights to mine three out of four blocks of Hajigak, a series of rugged mountain ridges 100 kilometers (60 miles) west of Kabul. The deposit holds an estimated 1.8 billion metric tons of ore, almost as big as India’s largest iron ore mine.
The group includes state-run companies Rasthriya Ispat Nigam Ltd. and NMDC Ltd. (NMDC), and non-state companies JSW Steel Ltd. (JSTL), JSW Ispat Steel Ltd., Jindal Steel & Power Ltd. (JSP) and Monnet Ispat & Energy Ltd. (MISP) Seshagiri Rao, chief financial officer for JSW Steel and JSW Ispat, didn’t answer four calls to his mobile phone. Spokesmen for the other companies and secretary at the steel ministry declined to comment on the details of the plan.
“The consortium will request for sovereign guarantees for providing financial assistance to the consortium by way of interest-free long-term loan, grant-in-aid, etc., for steel, infrastructure and port related projects,” Steel Authority said in a Nov. 30 statement.
The group has separately proposed building a 900-kilometer railway line from Bamiyan in Afghanistan to Zahedan in Iran at a cost of $4.3 billion. The railway line will help ship ore from Hajigak back to India via Iran.
The Indian venture overtakes Metallurgical Corp. of China plan to spend $2.9 billion on the Aynak copper deposit as the biggest overseas investment in Afghanistan. The Chinese state company won the right in 2007 to mine the biggest copper state deposit in Afghanistan by pledging to build a coal mine, power plant, smelter and railroad.
This year, China National Petroleum Corp. offered the highest royalty and a refinery to win Afghanistan’s first oilfield auction last month, using a strategy that helped Chinese companies gain access to African resources. Chinese companies have announced $43.35 billion in energy and mining acquisitions overseas this year, compared with $3.91 billion by Indian companies, according to data compiled by Bloomberg.
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