MAC: Mines and Communities

Jindal quits Bolivia, intends pursuing international arbitration

Published by MAC on 2012-07-24
Source: Statement, AFP

India's Jindal Steel and Power conglomerate has finally terminated its contract with the Bolivian government.

A month ago, we  pointed out that the company so far "hasn't threatened to go to international arbitration", asking: "Is that just a matter of time - or does Jindal feel it's on somewhat shaky ground?" See: Bolivia: to nationalise or not?

Clearly Jindal doesn't share that sentiment. Last week it announced that  it "intends to pursue international arbitration relating to the contract."

Jindal Steel and Power terminates contract with Bolivian Govt.

Jindal Steel & Power Press Release

17 July 2012

The termination comes due to the anti-investor friendly attitude of the Bolivian Government

New Delhi,: Jindal Steel Bolivia (JSB), a subsidiary of Jindal Steel & Power Ltd., on July 16, 2012 terminated the contract signed with the Bolivian Government fo rinvestment of US$ 2.1 billion for the El Mutun mines.

The termination comes in the wake of the issuance of a letter to the Govt. of Bolivia on June 8, 2012 conveying its intention to terminate the contract due to the non-fulfillment of contract conditions on the part of the Bolivian government.

As per terms of the Joint Venture Contract, the Govt. of Bolivia had 30 days time to resolve the issues failing which JSPL could terminate the contract within 7 working days thereafter. The company took the decision, after all its efforts to resolve the issues and take the project forward did not meet with success. Due to the non-fulfillment of the contractual obligations and unwillingness to fulfill the contract on the part of the Govt. of Bolivia, JSPL has been forced to terminate the contract.

JSPL had signed a Contract with the Government of Bolivia in the year 2007 for investing US $ 2.1 Billion in Iron Ore Mining, Pelletization (10 million ton per annum), DRI (6 million ton per annum) and Steel making (1.7 million ton per annum). This was the single largest foreign investment in Bolivia.

As per the contract, Govt. of Bolivia was to sign an agreement for supply of natural gas required for the project - 10 million cubic metre per day (MCD) within 180 days of signing of the contract. The same has not been signed till date. The Govt. of Bolivia was willing to commit only 2.5 MCD of gas (as against a total requirement of 10 MCD) from 2014 onwards due to non availability of gas in the country, whereas the company was being asked to make investment as per capacities originally envisaged under the Joint Venture Contract. Also, the Govt. of Bolivia did not provide the agreed contract area for setting up the steel project till date.

In view of the aforesaid breaches of the Bolivian Government and its entities, the company intends to pursue international arbitration relating to the contract.

For further information, please contact - Vivek Sharma 9818552437

India Jindal Steel quits $2.1-bln Bolivian mining deal

Penny MacRae


17 July 2012

India's Jindal Steel and Power scrapped plans Tuesday to invest $2.1 billion in a Bolivian mining project and blamed the South American nation's "non-friendly business attitude" for the deal's collapse.

The Indian steelmaking giant, which planned to ship home iron ore mined from Bolivia's El Mutun mines to supply its domestic steelmaking operations, said the Bolivian government failed to guarantee enough natural gas to run the project.

The long-threatened cancellation of the mining venture -- the single largest foreign investment in Bolivia -- was due "to the non-fulfillment of contract conditions on the part of the Bolivian government," Jindal said in a statement.

"The termination comes due to the non-investor friendly attitude of the Bolivian government," the statement added.

A company spokesman told AFP that Jindal stood to lose $90 million from its investment in the project but that it was "confident we will claim it (back) through international arbitration".

The Indian company warned the Bolivian government on June 8 it would scrap the contract to develop the sprawling iron ore deposit near the Bolivian town of Puerto Suarez and the Brazilian border unless the gas dispute was resolved.

"The company took the decision after all its efforts to resolve the issues and take the project forward did not meet with success," Jindal said.

There was no immediate comment from Bolivian government officials on Jindal's action but both sides have claimed breach of contract.

Jindal signed an investment agreement in 2007 with the Bolivians to build the El Mutun mines and to set up a plant to process iron ore and build a steel plant with an annual production capacity of 1.7 million metric tonnes.

But the project ran aground with Bolivia charging that Jindal had failed to adhere to its investment schedule.

The Indian group had been due to pay $600 million over two years, but only paid about a small amount, prompting Bolivia to seize Jindal's bank guarantees.

Jindal replied that the Bolivian government was willing to supply only a quarter of the initial 10 million standard cubic metres of natural gas a day the two sides agreed upon.

The fuel shortfall was due to lack of availability of gas in the country, Jindal said.

Jindal's contract had given it rights to mine El Mutun mines, regarded as one of the biggest untapped iron ore mines globally, for 40 years.

Jindal, which has been seeking to boost its self-sufficiency in raw materials, was due to exploit half the reserves in El Mutun area, creating 6,000 jobs directly and 15,000 indirectly,

But last week, Jindal's Chairman Naveen Jindal said the project's survival would depend on gas allocation for its functioning.

"What they are giving us is one fourth of the (required) gas and are saying that you don't scale down the capacity -- we will give you gas later. Is it possible? How can we plan our investment on such assurances?" Jindal had asked.

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