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Binani may buy Indonesia mine for over $400 mn

Mumbai : The Binani group is learnt to be in advanced negotiations with one of Indonesia’s largest coal producers, PT Berau, to acquire a coal mine to feed its growing cement operations in India.

The size of the proposed acquisition is estimated to be more than $100 million or upward of Rs 400 crore, according to sources close to the development.

PT Berau, a three way joint venture between PT Armadian Tritunggal, the Netherlands-based Dan Rognar Holding and Japan’s Sojitz, has coal mining operations in the Lati, Binungan and the Sambarata areas of the east Kalimantan region with an annual coal production of about 40 million tonne.

Interestingly, Anil Ambani’s ADAG group had earlier evinced interest in buying a mine, also from PT Berau. “I can’t say which company we are talking to, but it is part of our plan to own raw materials,” deputy managing director Vinod Juneja told ET.

Binani’s move is part of a trend by Indian companies to buy natural resources overseas to ease costs and also ensure availability. Increased coal supply is needed as the Binani group plans to double their Indian cement operations to 12 mt by 2012.

The Braj Binani-controlled group, which also has interests in glass fibre, have recently made Binani Cement their flagship company. The company which earlier imported coal mainly through long-term contracts has also altered its sourcing strategy due to tight supplies.

“Earlier, 60% of our total requirement was long term, now that percentage is met through spot purchases,” said Mr Juneja. Binani Cement too imports coal from Indonesia and South Africa.

Apart from the ADAG group, steelmaker JSW Steel had recently acquired a coal mine in Indonesia. Coal accounts for about 15-20% of the total cost of production in an Indian cement company, depending on the age of the plant.

With coal prices almost doubling in the past three months to about $350 per tonne, cement and steel companies and other sectors where coal is a vital part of the production process, are rushing to acquire coal mines. The Indian cement industry requires 25 mt of coal every year, but the industry gets only 14 mt. The remaining 11 mt is imported.

Binani Cement, on Monday, said robust prices led to a sharp rise in its fiscal fourth quarter net profit to Rs 64.13 crore, from the previous figure of Rs 25.47 crore.

For the full fiscal year, the net profit totalled Rs 176 crore, compared to Rs 96 crore last year. Binani Cement currently has an installed annual capacity of 6 mt through its unit in Rajasthan. It is also actively acquiring units overseas.