JSW Steel's acquisition of Mozambique coking coal mines hits roadblock amidst legal dispute

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JSW Steel's proposed acquisition of Minas de Revuboe (MDR), a coking coal firm, has hit a roadblock as MDR has initiated legal action against the Mozambique government through the International Centre for Settlement of Investment Disputes (ICSID). The dispute centres on issues related to a mining concession and was officially registered with ICSID on September 9, followed by the appointment of an arbitrator on September 18.

JSW Steel's plan to acquire a 92.19 percent of the equity and shareholder loans of MDR for $73.75 million would have granted the company access to over 800 million tonnes of premium hard coking coal reserves in Mozambique, a key raw material for steel production. The acquisition plan was announced in May 2024.

MDR has raised a dispute over a mining concession with the Mozambique government, according to the details on the ICSID website. It was not immediately clear whether the concerns are related to  operational issues, regulatory changes or disagreements over the terms of the concession agreement. However, the legal proceedings may potentially delay or complicate JSW Steel's acquisition and its plans to access the coking coal reserves, which are crucial for the steelmaker's raw material supply.

Further details on the nature of the dispute are awaited. An email sent to company officials, MDR and attorneys remain unanswered.

MDR owns a high-quality and large-scale pre-development stage premium hard coking coal mine project in the Moatize Basin of Tete Province.  The deal is still subject to approval by the Ministry of Mineral Resources and Energy in Mozambique and other customary approvals.

The steelmaker had also announced the acquisition of Australian mining company M Res NSW HCC Pty Ltd through an investment of $120 million. These  investments align with JSW Steel's strategy to secure high-quality raw materials and optimise its cost structure.

Earlier in 2024, another ICSID claim was filed against Mozambique, this time by a US asset recovery firm. The claim revolves around the "unlawful transfer" of a mining licence, which the firm acquired from London-listed Pathfinder Minerals. Pathfinder had been involved in a longstanding dispute with the Mozambican government over a mining concession that was allegedly taken over without proper compensation.

The above case, along with the dispute involving MDR, highlights the growing tension between the government and foreign investors in the mining sector.