Kobe’s $1bn plan in the balance
In July this year, state-run Vinacomin, TIC’s current biggest stakeholder, 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. This raises a big question on the prospects for its planned $1 billion iron nugget manufacturing facility in the central Nghe An province. A reliable source at Nghe An South-East Economic Zone Management Authority, confirmed to VIR that the Vietnamese government had turned down state-run Vinacomin’s proposal to get Kobe Steel involved in Thach Khe Iron Joint Stock Company (TIC), the developer of the mining project.
Established in 2005,TIC was formerly comprised of Vinacomin with 30 per cent, 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). Last year, BIDV, Song Da, Vinashin and VNPT sold their stakes to Vinacomin. Vinacomin is now waiting for prime ministerial approval to raise its stake in TIC to either 54 or 60 per cent.
Located in the central Ha Tinh province, 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.
"The government did not agree to sell any stake in TIC to Kobe Steel, but it is committed that the world’s fourth largest steel-maker will be supplied with Thach Khe iron ores on a long-term contract so as to facilitate the operation of its facility in Vietnam,” the source told VIR.
Kobe Steel obtained the investment certificate for its iron nugget manufacturing facility in 2010 in Dong Hoi Industrial Zone as a part of its oversea investment expansion. The firm announced this $1 billion facility, which would use the next-generation ITmk3® iron-making process that it developed, would produce and market 2.4 million tonnes of iron nuggets per year.
"Since its ground breaking ceremony two years ago, Kobe Steel has done almost no further works at the project site. Kobe Steel told us it would like to acquire a slice in TIC before it continues developing the facility,” said the source, adding that Nghe An authorities had already granted the firm a grace period.
In a related move, Nghe An authorities recently asked the Vietnamese government for special incentives for Kobe Steel’s facility as a mega-foreign-invested project located in a special difficult area.
The proposed incentives include 10 per cent corporate income tax for the facility’s lifetime, import tax exemption for five years for input materials and equipment not produced in Vietnam and an exemption of land and water surface rental fees for 11 years since the facility comes into commercial operation.
