The Road to Acquisition: JSW Steel's Coal Bid in Mozambique
Bloomberg reports that in May 2024, JSW Steel, led by Sajjan Jindal, reached a landmark agreement to acquire Minas de Revuboè, a significant coal concession in Mozambique. The deal valued the coal mine at approximately $50 billion and was seen as a strategic move by JSW Steel to expand its global footprint. However, before the deal could be finalized, unforeseen complications arose, involving both legal and political issues that have since jeopardized the entire acquisition process.
The Role of the Mozambican Government
The setback began when, shortly after JSW Steel's acquisition agreement was made public, the Mozambican government revoked MdR's lease to mine the coal. This move has left JSW Steel in limbo, as they cannot move forward with the transaction without the necessary mining rights in place. The situation worsened in August 2024, when the Ministry of Mineral Resources and Energy of Mozambique issued a public notice offering a 30-day window for objections to the lease being transferred to a new company, Stonecoal SA.
The Controversial Stonecoal Connection
The inclusion of Stonecoal SA as a potential new holder of the mining rights has raised further concerns, especially given that four of the company’s five directors are employees at Jindal Steel & Power Ltd. (JSPL), the sibling company run by Naveen Jindal, Sajjan's younger brother. This connection between the two Jindal family companies has sparked suspicions of conflicts of interest, especially given that Stonecoal could potentially take over the mining rights, sidelining JSW Steel in the process.
Legal Battles and Political Uncertainty
The revocation of the mining lease has triggered a fierce legal battle between MdR, the original owner, and the government of Mozambique. While JSW Steel finds itself as a passive observer, the case is becoming increasingly contentious. The timing of this dispute is particularly critical, as Mozambique is also grappling with political instability. The country recently experienced violent protests following disputed elections, with at least 278 people reported dead. These events put additional pressure on the newly elected president, Daniel Chap, who assumes office on January 15, 2025. His ability to stabilize the country and attract foreign investment will now be under intense scrutiny, especially given the uncertainty surrounding major deals like this one.
A Family Empire in Jeopardy
JSW Steel and Jindal Steel & Power Ltd are part of the $35 billion empire built by the late OP Jindal, one of India’s most influential industrialists. The empire was divided among his four sons, with each son overseeing separate companies. While the companies are run independently, occasional cross-holdings and competition have existed, particularly between Sajjan and Naveen Jindal. The ongoing legal issues surrounding the coal mine acquisition have now added another layer of complexity to their already intricate business dynamics.
The Financial Stakes and Comparisons
JSW Steel had agreed to acquire a 92% stake in Minas de Revuboè for just $74 million in May 2024, which is significantly lower than the $555 million price tag that Anglo American Plc, the British mining giant, had previously considered for a 58.9% stake in the same coal project over a decade ago. Anglo American eventually walked away from the deal, leaving the project in limbo. Despite the relatively low valuation of the mine in the current market, the political and legal obstacles have made the acquisition a complicated and high-risk venture for JSW Steel.
