Japan’s Kobe Steel wins a stake in Thach Khe iron mine

The Government Office, in an announcement released on August 2, stated that Deputy Prime Minister Hoang Trung Hai had accepted Kobe Steel’s investment into the Thach Khe Iron Joint Stock Company (TIC), the miner of Thach Khe iron ore deposit in the central province of Ha Tinh. The approval follows a proposal by the Ministry of Industry and Trade (MoIT) sent to the government last month.

The governmental approval was finally reached despite a source close to the case saying last year that a proposal by state-run Vietnam National Coal and Mineral Industries Group (Vinacomin) - TIC’s current biggest stakeholder, might have been turned down to get Kobe Steel involved in TIC.

In July 2012, state-run Vinacomin proposed the prime minister that it would either sell part of its stake in TIC to Kobe Steel or set up a joint venture with the Japanese heavyweight to take part in TIC.

The governmental approval now means that Kobe Steel has removed its biggest challenge to start construction of its  $1 billion iron nugget facility in Nghe An, for which the firm received an investment certificate in March 2010.

India’s steel maker Tata Steel had also previously expressed an interest in investing in the Thach Khe iron ore mine, but has not yet gained an approval.

Kobe Steel wants to invest in the iron ore mine in order to ensure raw material supplies for its facility in Nghe An, which has been delayed due to awaiting approval for investment in TIC, said Phan Xuan Hoa, deputy director of the Management Authority of Nghe An South-East Economic Zone where Kobe Steel’s manufacturing facility is situated.

The facility will produce and market 2.4 million tonnes of iron nuggets per year. Kobe Steel also said that the production at the facility would use the next-generation ITmk3 iron-making process.

Although Kobe Steel has gained the nod from the Vietnamese government to invest in the mine, it will still have to hold further discussions with other stakeholders in TIC.

 “We have not concluded what percentage stake that Kobe Steel will hold in TIC,” said an anonymous official at the MoIT’s Heavy Industries Department.

Established in 2007, TIC was formerly comprised of Vinacomin with a 30 per cent stake, state-run Vietnam Steel Corporation (VNSteel) (20 per cent), Ha Tinh Mining and Trading Corporation (Mitraco) (24 per cent), VNPT (4 per cent), Song Da (5 per cent), BIDV (5 per cent), Vinashin (5 per cent), Bitexco (4 per cent) and Thang Long Mineral (3 per cent). In 2011, BIDV, Song Da, Vinashin and VNPT sold 19 per cent of their stakes to Vinacomin after the prime minister ordered the four state-owned companies to divest  from TIC.

Thach Khe is estimated by geologists to hold iron ore reserves of some 500-600 million tonnes, at least 300 million tonnes of which was thought to be commercially exploitable. The estimated investment capital of the first mining phase with the capacity of five million tonnes per year is around $400 million. Preparations for mining works at Thach Khe deposit stopped in mid-2011 due to TIC’s restructuring plan.