July 17 (Bloomberg) -- Jindal Steel & Power Ltd., India’s second-biggest steelmaker by market value, said it terminated a contract to build the $2.1 billion El Mutun iron mine in Bolivia, the biggest investment project to be canceled since President Evo Morales took office in 2006.
Bolivia offered a quarter of the 10 million cubic meters a day of natural gas originally pledged and failed to provide enough land for the project, New Delhi-based Jindal said today in a statement posted on its website. Bolivia’s government said it will call for new bids for the project within six months.
“Due to the non-fulfillment of the contractual obligations and unwillingness to fulfill the contract on the part of the government of Bolivia, Jindal has been forced to terminate the contract,” the company said, adding it plans to pursue international arbitration.
Jindal, which signed a contract in 2007 to develop 20 billion tons of iron-ore reserves at El Mutun, had planned to build a 1.7 million ton-per-year steel plant in addition to a sponge-iron factory, a pellet unit and a power project, according to the company’s website. Jindal has spent $90 million on the project to date, according to the company.
Investment has dwindled in the landlocked Andean nation since Morales nationalized gas fields, telecommunications and electricity companies. During the past month, the government has seized mines belonging to Glencore International Plc and South American Silver Corp.
Jindal withdrew from the project for lack of funds and not because of government pressure, Mining Minister Mario Virreira said. The government seized the company’s $36 million guarantee for failing to meet its contract, he said.
“We’re all aware of Jindal’s lack of serious economic management and economic weakness,” Virreira said today in a press conference in La Paz broadcast by state Radio Patria Nueva. “This puts an end to Jindal’s participation in the country.”
Future bidders will have to provide financial guarantees for at least 25 percent of investment commitments, Virreira said.
Jindal’s New Delhi-based spokesman Vivek Sharma didn’t immediately respond to a telephone call and e-mail outside business hours.
Jindal, which posted a $1 billion profit on $3.55 billion in revenue last year, fell 0.8 percent to 415.65 rupees in Bombay. The shares have dropped 8 percent this year.
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