Bolivia encashed $18-m guarantee, says Jindal Steel

New Delhi: Jindal Steel & Power on Friday said the Bolivian government had encashed its entire $18 million bank guarantee for the El Mutun project, and the company was negotiating with the government to resolve the dispute.

“We wrote to them (the Bolivia government) that this encashment is wrong,” director Sushil K Maroo told Reuters in an interview.

The 40-year contract gives Jindal the right to mine about half the El Mutun site, which is believed to contain one of the world’s largest iron ore reserves, though they are said to be of medium-grade quality.

According to the contract, effective since July 2009, Jindal is required to make an investment of about $1.5 billion in five years. The government can encash part of the bank guarantee, proportionate with the shortfall in target investment at the end of five years according the agreement, Maroo said.

“The issue is getting resolved shortly,” Maroo said, adding the company was engaged in negotiations with the government on this.

Last month, Sergio Alandia, head of El Mutun Iron and Steel Co, a state-run unit charged with overseeing the project, said Jindal wanted to produce 40% less steel and around 20% less iron a year than initially agreed.

Maroo blamed lack of infrastructure support in Bolivia for seeking changes in the terms of the contract for the project that requires Jindal to invest a total of $2.1 billion. “Modifications that were asked for were because it was not possible to do it (at the originally agreed terms) because of the country’s infrastructure,” he said.

Maroo said the company was still committed to the project, which will allow Bolivia to develop a steel-making industry for the first time and is the biggest proposed investment in a single project in Bolivian history. He declined to comment on media report that the steel maker was planning to acquire Oman-based Shadeed Iron & Steel for nearly $500 million.

On the company’s strategy for acquisition of steel plants overseas, Maroo said, “We are not going aggressively. If there is steel capacity somewhere and it makes sense and we are in a position to link it up with raw material, we are there. Otherwise we are very happy with India,” Maroo said.

Source: Reuters


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