NMDC drops stake buy in Brazil mine

The move comes barely a month after the company shelved a proposal to acquire the Vinci coal project in Russia as one its owners were listed in North Korea.

NMDC was planning to pick 50 per cent equity in Greystone for $40 million to take the project to Bankable Feasibility Study stage and initiate exploration,drilling and allied activities after the equity transfer.

Greystone had suggested that NMDC pay $5 million on completion of the Bankable Feasibility Study stage and the remaining payments could follow on completion of stipulated milestones,a senior steel ministry official told The Indian Express.

Accordingly,NMDC was in talks with Greystone’s parent company Zamin Ferrous and had also inked an Exclusivity Agreement with Zamin to submit a binding offer for acquiring 50 per cent of Greystone in March 2011.

It was during the process of due diligence that issues related to ownership cropped up,triggering concerns among the Board.

“In subsequent perusal by NMDC of Greystone’s ownership last month it was found that the mining entity and its parent company Zamin Resources were unlisted firms. Also,Zamin’s fully-owned subsidiary company Block-V,which holds almost 100 per cent stake in Greystone is listed in the British Virgin Islands,a known tax haven,” the official said.

Moreover,the Bahia provincial government in Brazil is yet to renew the leases of the company,which is imperative for further exploration and NMDC is not in the know,when Greystone’s leases would be renewed.

“NMDC is worried … there could be problems at a later stage if the takeover exercise is executed without adequate due diligence. The company is unwilling to proceed further on acquisition talks. In all probability NMDC is likely to drop its takeover proposal,” the official said.