India’s largest public sector aluminium producer National Aluminium Company is in the process of acquiring around 25% stake in MEC Coal by March 2012 for an undisclosed sum.

A member of the company’s board of directors told Financial Chronicle Nalco has already shortlisted MEC Coal for supplying 8 million tonnes of coal per annum of which 4.5 million tonnes will be used in Indonesia while the remaining would be used in India.

The official said that “To secure the steady supply of coal it is important that we buy stake in the company so that the contract is not cancelled mid-way. We are looking at acquiring around 24% to 25% of stake in MEC Coal and are conducting due diligence for deciding the valuation. The entire procedure will be completed by March.”

Mr Sanjay Jain an analyst with Motilal Oswal said buying stake helps in project economics and is always better so that the mining company will not be able to cancel the contract halfway. He said that “Nalco will have a better say if they own some stake in the mining company. Also, it will help them in backward integration and the company can hedge prices if it has its own supply of coal.”

MEC Coal won the Nalco contract by offering the lowest priced coal.

MEC (Minerals. Energy. Commodities), led by its executive vice chairman Mr Madhu Koneru, proposes to develop an integrated infrastructure complex in east Kalimantan, an under developed coal-rich province in Indonesia.

Two companies MEC Coal and Bumi Muara Prasada were bidding for the contract to supply coal to Nalco’s INR 18,000 crore east Indonesia based Kalimantan aluminium cum power project. PT Bumi Resources is one of the world’s largest coal producers and Indonesia is the world’s largest exporter of the black gold.

(Sourced from www.mydigitalfc.com)