The Grey Chronicles

2009.August.10

Understanding GSHL: The Lesser-Known Deals II



This is the second part of The Lesser-Known Deals of Global Steel Holdings Ltd [GSHL]. Most of these newsworthy events were not picked up by any local newspapers although they were published years after GSHL came to the Philippines in 2004. GSHL is a global, multinational, company, and its moves and deals should be BIG news and plastered across any business section in Philippine newspapers. Here are some examples, in chronological order:


Mozambique: Coal Exploration

Fatima Momade, Mozambique’s national mining director, in a February 2008 interview with Reuters (2008) announced that GSHL was awarded a $116 million licence to mine for coal, covering an area of 30,000 hectares, for five years in its northern Tete province. The Mozambican blocs are located close to the mining areas of ArcelorMittal, Tata Steel and Vale. Brazilian mining giant Companhia Vale do Rio Doce [CVRD] has invested $1.2 billion to revive coal production in Mozambique’s resource-rich Moatize region. Moatize is estimated to have reserves of between two to three billion tons of coal and a potential output of up to 10 million tons per year. The revival project will also involve the development of the mine, rehabilitation of the 550 km Sena railway linking Tete to the port of Beira and the construction of a coal-fired power station.

In an email received from Ispat Industries Ltd. [IIL] by Bloomberg (2008), it disclosed:

“The two blocks have proven resource of 70 million tons of coking coal with low to medium ash content. The actual reserves may be higher considering potential of the two blocks. GSHL has already worked out plans for mining and coal preparation plant to be set-up on-site. Mining production of coal is expected to start in next 3-4 years. … GSHL has now re-focused its strategy to acquire mineral resources to consolidate its steel making and associated businesses, is also looking at other opportunities to acquire mining assets in coal, iron and other captive resources to support its core business of steel making world-wide.”


Brazil’s Erebus

Mining Exploration News (2008) quoted that IIL was ready to explore iron ore reserves, estimated at 200-500 million tons, in Brazil. IIL has floated a separate company, Erebus, to spearhead the Brazil venture. Ispat Industries and group company, GSHL, have picked up 40% and 30% stakes, respectively, in Erebus. The remaining 30% will be held by a local Brazilian firm. The Chairman of Ispat Industries, Pramod Mittal said:

“We’ve done prospecting work near the proposed site and are due to commence preliminary exploration soon. This will be followed by detailed exploration and a feasibility study and mine development. We want to start mining operations over the next 24 months.”

IIL’ Annual Report 2007-08 (2008a) reveals that Erebus Ltd., with $1,000,100 share capital issued 14 February 2008, was incorporated in Mauritius under the Indian Companies Act of 2001 and has been granted a Category 2 Global Licence under the Financial Services Development Act of 2001. Erebus directors, namely: Virrsing Ramdeny, Ramesh B. Bhosale and Jai Prakash Agarwal reported that:

“[Erebus] proposes iron ore mining activities in Brazil. The country is endowed with large reserves of natural resources, such as, iron ore, manganese, bauxite etc. Preliminary exploration will be undertaken and, upon completion thereof, detailed geological exploration will be undertaken leading to feasibility study and mine development. The iron ore mining project is proposed to be undertaken in joint venture.”


Georgia’s Oil Block

GSHL also entered in energy sector by acquiring two oil blocks in Georgia through its subsidiary Global Oil & Energy Limited [GOEL]. One of the two blocks, Block-VIIB, is already producing oil and the second one is under exploration. The two blocks are estimated to have about 550 million barrels of reserves and once production stabilizes GOEL targets production of 4000-5000 barrels a day within next 3 years (Bloomberg, 2008).

Fianchetto (2009) clarified that GSHL’s Georgian acquisition consisted of two oil and gas areas — Block-VIIB and Block VIII — in the Black Sea region. Block-VIIB, located 350 km from Tbilisi, Georgia’s capital, has reserves of 350 million barrels, while Block-VIII holds 220 million barrels. The move was aimed at becoming a major player in natural resources with emphasis on minerals and raw materials for steel making and energy sectors.


The New Gold Rush

The Tribune based in Chandigarh, India (2007) observes:

“IIL’s parent company Global Steel Holdings is exploring the possibility of projects in the overseas for capacity expansion and backward integration to ensure a perennial source of raw materials and strike a business synergy in various parts of the world.”

Wharton (2008) likened this scenario as part of a global race for natural resources whereby China and India are undeniably competing for the “new gold rush”. A recent paper by the Export-Import Bank of India states:

“There is an increasing trend among large Indian manufacturing companies in sectors like steel, paper, power, fertilizer and chemicals to acquire natural resources bases abroad, primarily in developing countries in Asia, Africa, the CIS (Commonwealth of Independent States) and Latin America. Indian companies look for acquiring ferrous and non-ferrous mines, coal fields, forest acreage, phosphate mines, etc., to ensure regular and assured supply of raw materials at reasonable prices for their operations in India.”


Notes:

Fianchetto (2009). Ispat Industries’ Georgian find. Business World (India), ABP Pvt Ltd , 2009. back to text

India Knowledge@Wharton (2008). Sterlite’s Asarco Bid: Part of a Global Race for Natural Resources. Place: Wharton School of the University of Pennsylvania, 26 June 2008. back to text

Ispat Industries Ltd. [IIL] (2008). Global Steel to Spend $115 Million in Two Mozambique Coal Mines. Tokyo: Bloomberg News, 07 February 2008. 1 | 2

Ispat Industries Ltd. [IIL] (2008a). Ispat Industries Limited Annual Report 2007-08. Mauritius: Ispat Industries Limited, 26 June 2008. pp. 157-162. back to text

Mining Exploration News (2008). Ispat Ready To Exploration Of Iron Ore Mine In Brazil. Mining Exploration News, 30 August 2008. back to text

Reuters (2008). Global Steel wins Mozambique coal licence. Maputo: Thomson Reuters, 12 February 2008. back to text

Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 LicenseDisclaimer: The posts on this site do not necessarily represent any organization’s positions, strategies or opinions; and unless otherwise expressly stated, are licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

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2 Comments »

  1. All these projects are also another BIG SCANDAL siphoning large amounts of money. Please probe all these projects also in detail.

    Comment by pettyjohn — 2009.September.5 @ 16:25 | Reply

  2. Very useful blog..

    very thanks

    Comment by Allan — 2009.August.15 @ 16:41 | Reply


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