Western Coalfields to invest Rs 200 crore

BS Reporter / Mumbai/ Nagpur March 13, 2007

To open four new coal mines with a combined annual capacity of 3.65 mt.

Western Coalfields Ltd (WCL) intends to invest Rs 200 crore to open four new mines in Vidarbha with a combined annual capacity of 3.65 million tonnes for dedicated supply to the state electricity utility’s thermal power plants in the region.

Sources said that negotiations on signing an agreement on cost plus basis with Maharashtra Generation Company Limited (Mahagenco) were in final stages.

Three of these mines are open cast while one is an underground mine. They include, Durgapur extension, Bhatadi extension, Junad and Deep Waghoda underground mine.

The coal company expects to produce 2 million tonnes per annum (MTPA) from Durgapur, 0.65 MTPA from Bhatadi extension, 0.60 MTPA from Junad Deep and 0.39 MTPA from Waghoda underground mine.

The projected capital investment for the mines is Rs 40.48 crore in Durgapur extension, Rs 74.29 in Bhatadi extension, Rs 30 crore in Junad Deep and Rs 55.15 crore in Waghoda underground.

Sources said that the coal company was unable to open these mines as the expected internal rate of return (IRR) had been calculated at less than 12 per cent.

Coal India Limited (CIL) has stipulated that new mines should have an IRR of more than 12 per cent. The mines can however, be operated if the coal company can find some consumer who is prepared to accept coal on a cost plus basis formula.

As Mahagenco has a number of thermal power stations in the region, it can get uninterrupted supply of coal from these mines and can afford the “cost plus” sharing formula in low transportation costs.

The WCL is already operating two mines, Adasa underground having an annual capacity of 0.21 MTPA and Kolgaon open cast with 0.40 MTPA capacity on cost plus basis on an agreement with Mahagenco.

The coal company’s total production in the last financial year was 43.2 MT and if these agreements are signed and new mines opened, it would increase substantially over the next four years.