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NEWS

Indian firms eye mineral deposits in Uzbekistan

20 September 2011

www.livemint.com of 9/20/2011. By Ruchira Singh, Mint, New Delhi - Indian state-run companies are planning to bid for mineral assets in Uzbekistan for future growth in a project that has the blessings of the government in Delhi that's keen on strengthening its influence in the neighbourhood.

A meeting last week between delegates of the two countries in New Delhi could result in NMDC Ltd and National Aluminium Co. Ltd (Nalco) bidding for deposits of iron ore, fertilizer minerals and gold, said S.K. Srivastava, additional secretary in the mines ministry.

"Neighbouring countries are looking at India very positively as India is being recognized as a global investor," Srivastava said. "This is good for Indian companies as they must expedite their search for overseas assets to lessen the deficit of minerals."

The country's largest iron ore miner, NMDC, is interested in bidding for one iron ore deposit, one potassium deposit and one phosphate deposit, while Nalco, keen on diversifying, is considering biddingfor a gold deposit, Srivastava said.

NMDC has sought clarifications on some issues from the Uzbekistan government, and once these are received, it will undertake a feasibility study followed by an expression of interest.

Exploration and mining ventures in Uzbekistan, a former republic of the erstwhile Soviet Union, may be easier to execute compared with Afghanistan, where a consortium of companies led by Steel Authority of India Ltd (SAIL) made a bid for for the Hajigak iron ore deposits earlier this month.

Uzbekistan is politically stable and preliminary exploration has already been conducted on many of the deposits, Srivastava said.

Besides, the Uzbekistan government's rules allow for direct negotiations if needed.

"The licence for using any land resources for geological survey for exploration and prospecting of precious metals and other minerals would be generally issued through public bids," a brief from the Uzbekistan delegation reads. "However, the decree (of the government) stipulates a possibility of direct negotiations avoiding public bids if need be and decided by the Uzbek cabinet."

The Nalco and NMDC stocks have been battered by the overall weakness in the markets amid concerns over the health of the global economy.

An analyst said it was too early to say if the companies' overseas plans will be regarded positively by investors.

"Even though the long-term prospects may be good for the companies, investors are far more cautious today," said Prasad Baji, senior vice-president at Edelweiss Securities. "They will look for details such as how valuable the overseas assets are and how much the companies pay for it, and whether they will be able to consummate the deal."

Srivastava said the biggest challenge for the Indian companies would be how to evacuate the minerals out of land-locked Uzbekistan.

"There are ideas. There could be a slurry pipeline coming into India via Pakistan, or it could come via a port at Iran," he said. "Or it could simply be sold overseas."

One of Uzbekistan's most abundant resources is gold, but the country also has uranium, base metals, natural gas and molybdenum.