The Economic Times (ET) Friday quoted two sources, indicating that Indian state-run iron ore miner, National Mineral Development Corporation (NMDC), is in talks to acquire controlling stake in mining firm Greystone Mineracao do Brasil for $1 billion.  

The transaction amount includes the cost of building infrastructure to develop the mines. NMDC is currently doing a technical, financial and legal due diligence of the iron ore mines which have reserves of 260 million tons, the report said.

According to ET, the target company owns 6 exploratory licenses in the state of Bahia in Brazil. Greystone is also developing a $3 billion iron ore project in neighboring Uruguay, for which, it is seeking a partner, the report added.

NMDC, which accounts for 15 per cent of India's iron ore production, has been scouting for iron ore mines overseas to cater to the needs of international buyers. Last month, it struck a deal with Australian miner Legacy Iron Ore to buy a 50 percent stake.

According to two people directly involved in the negotiations with Greystone, which is owned by London-based businessman Pramod Agarwal, NMDC is currently doing a technical, financial and legal due diligence of the iron ore mines that have reserves of 260 million tons, said ET.

According to ET, NMDC did not want to comment on the issue as negotiations are still on. The state-owned miner produces 24 million tons of iron ore in India through captive mines.
 
Pramod Agarwal, is the founder of Zamin Ferrous which owns Greystone and is a major trader based out of the UK. Agarwal built his business primarily by selling iron ore to countries in the erstwhile CIS and is well known in UK commodity trading circles, where a number of players are from India.

The negotiations between NMDC and Pramod Agarwal have been going on for the past two months and the UK-based businessman is expected to visit India next week to continue the talks, said the person who is familiar with the development.

If the talks are successful, then NMDC will have to develop the mines, lay a slurry pipeline and build a railway infrastructure connecting the site to the nearest port. The open pit Greystone deposit is of the magnetite variety, or of lower ferrous content, and will require the setting up for a beneficiation plant.

25th June 2011