India's largest steel company, Tata Steel, has set its sights on the Indian iron ore assets of one of UK’s largest independent steel trading companies - Stemcor, according to a media report.
Stemcor has run into trouble as a result of the global slowdown in the steel industry and is in rescue talks with banks after de-faulting on more than USD 1bn of loans.
The cash crunch has forced the company to offload some of its physical assets, including its iron ore mine in Orissa which could fetch an estimated USD 800M.
Stemcor produces 5Mt of ore each year, and has significantly higher reserves of over 100Mt. In addition, Stemcore has a 4Mt/y capacity beneficiation plant at Barbil, Odisha and a pellet plant complex at Jajpur, connected by a 220km underground slurry pipeline.
Together, the Indian assets are likely to get an enterprise valuation of $750-850M.
Privately owned Tata Steel is reported in media to be keen to acquire this iron ore to feed for its steel mills in India.
However, Essar Steel, Jindal Steel & Power, Jindal SW and Brazilian miner Vale have all been said to have expressed interest.
Stemcor has been granted a payment holiday by banks on its unpaid debt until September 16. It presented a recovery plan last week that proposed shrinking the business a move which would slash revenues by about 30%.
Stemcor is to present a full debt restructuring plan to lenders by the end of August.