Reddy group to source iron ore from Indonesia mines

July 21st, 2008 - 9:34 pm ICT by IANS  

Bangalore, July 21 (IANS) Mining and steel major Gala Janardhan Reddy (GJR) group has entered into a strategic alliance with PT Earthstone Resources of Indonesia to source iron ore from Sumatra mines for its greenfield integrated steel plant in Andhra Pradesh and export markets, said a top official here Monday. The GJR group, headed by Karnataka Minister for Infrastructure and Tourism G. Janardhan Reddy as its chairman and managing director, will invest $30 million in mining the iron ore with 64 percent ferric content and shipping part of it for captive consumption.

The investment will be made from internal accruals of the group.

“We have signed an agreement with Earthstone to acquire 50 percent economic interest in the project tenement located at Nalo Baru in Sumatra island, about 1,200 km from Indonesian capital Jakarta,” Reddy told reporters.

“We have tied up with GJR to float two SPVs (special purpose vehicles) by August for mining the iron ore with its domain expertise for captive use and exporting the remaining material in international markets,” Earthstone managing director Mahran Nasution said.

Earthstone, a diversified group with business interests in precious and base minerals in Asia and Africa, has acquired rights (licence) to develop and explore Nalo Baru mines, spread over 438 hectares, with an estimated reserves of 100 million tonnes of high-grade iron ore, valued at $10 billion at current prices.

Bramhani Industries Ltd, a wholly-owned subsidiary of GJR group, is setting up a 10- million tonnes per annum (TPA) integrated steel plant (in phases) at Jammalamadugu in Kadapa district of Andhra Pradesh at an estimated cost of Rs.220 billion over the next five-six years.

“In the first phase, we are setting up a 2.5 million TPA plant at Rs.70 billion. The modular plant will be expanded in phases to 10 million TPA by 2014. We will bring about four million tonnes of iron ore from Sumatra by ship from Teluk Bayur port to Chennai port and by rail wagons to the plant site (240km) for captive use,” Reddy said.

Till the plant goes on stream in 2010, the mined iron ore will be exported to China, Japan, Korea and other markets where the demand for high-grade ore is high.

Production of iron ore at Nalo Baru is set to commence from October after the US-based John T Boyd Co completes tenement, mining plan and reserve estimation study by September.

As one of the largest mining firms in the country, Reddy’s Obulapuram mining subsidiary in Andhra Pradesh spans the entire value chain from iron ore mining to manufacturing steel products.

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