Jindal Steel's Iron Ore Project in El Mutun Endangered

NEW DELHI: Naveen Jindal controlled Jindal Steel & Power's ambitious Bolivian project to mine 20 billion tonnes of iron ore is at risk after the Bolivian government encashed yet another $18 million bank guarantee from the Indian firm for not meeting contractual terms.

Jindal Steel Bolivia was billed to become the largest foreign direct investment for the Latin American country under President Evo Morales' reign.

The South American nation, which has been dragged to international court of arbitration by Jindal Steel Bolivia, had in 2010 encashed a similar amount blaming the company of not meeting its commitments. JSB has been struggling to hang on to the its half of the El Mutun deposit, considered amongst the largest iron ore deposits in the world.

According to people close to the development, this could well be the end of the road for the Indian company in Bolivia. "The writing is on the wall. It's hard to see how we can make this relationship work from here," the person said, who didn't want to be identified.

On its part Jindal had complained that without gas, promised by the government from the outset, it could not put up downstream projects. Last month, senior officials told Economic Times, that the two sides were discussing possibility of scaling down pellet, sponge iron and steel and power plant plans to adjust to the reduced gas supply.

But news reports from La Paz suggest, neither the state gas firm Yacimientos PetrolAferos Fiscales Bolivianos nor the the country's Mines Minister are keen on the Indian steel maker. Jindal Steel won the 40 year rights to the iron ore deposit in 2007; as per its contract with Bolivia JSB was to invest $ 600 million over 2 years.

The Morales led Bolivian government has announced new plans for the El Mutun mine, after reworking a more profitable share for state owned miner in zinc, lead and tin mines long operated by Swiss firm Glencore. It has already nationalised non-renewable natural resources in 2006. Morales had also made a similar move in the electricity sector. Last month, Argentina too had nationalised the oil firm YPF, revoking the controlling 51 percent stake Spain's Repsol had in the company.