JSW Steel Ltd (NSE: JSTL), India’s steel producer, has set its sights on a significant stake in the metallurgical coal unit of Teck Resources Ltd (TSX: TECK) as it aims to secure coal supplies vital for the company’s ambitious expansion endeavors.
The targeted stake in Elk Valley Resources Ltd., a subsidiary of the Canadian firm, ranges between 20% to 40% with mills from Japan and South Korea also lining up for a piece of the pie, potentially pushing the unit’s valuation to a whopping $8 billion.
With the clock ticking, Jindal anticipates the deal to finalize within the next month. In an interview with Bloomberg, he emphasized the superior quality of Teck’s metallurgical coal— a necessity for steel production in India where locally-sourced coal predominantly falls short in terms of grade.
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JSW’s overarching objective is to nearly double its steel production expertise to 50 million tons annually in India by the decade’s end. To realize this vision, the hunt for coal assets is spanning across international territories, notably Australia and Canada.
However, the road isn’t absent of competition. Last week, reports emerged of JSW’s quest for allies to jointly acquire a 75% interest in Elk Valley. However, lurking in the shadows is Glencore Plc, which earlier in June floated an alternative proposition: an outright purchase of the business, mirroring the $8 billion valuation, as opposed to an all-out takeover of Teck.
Teck Resources last traded at $54.52 on the TSX.
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