Bolivia may seek arbitration against Jindal on El Mutún project

Bolivia’s government may file a request for arbitration against India-based Jindal Steel & Power (JSPL) following the possible termination of a contract to invest $2.1 billion in mining and steelmaking operations in the country.

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JSPL subsidiary Jindal Steel Bolivia sent a letter to the government of Bolivia on Friday June 8 conveying its intention to end the contract for investment in the Latin American country due to non-fulfilment of contractual obligations on the part of the government.

The Bolivian authorities have 30 days to resolve the issues raised by JSPL, while the company can terminate the contract within seven days, according to the Indian mill.

JSPL signed a contract with Bolivia’s government in 2007 to spend $2.1 billion on the El Mutún project.

This was to include iron ore mining, a 10 million-tpy pellet plant, a 6 million-tpy DRI unit and steelmaking operations producing 1.7 million tpy.

Bolivia’s government was to sign an agreement for supply of the natural gas required for the project – 10 million cubic metres per day – within 180 days of signing the contract.

JSPL said this has not yet been signed.

Bolivia is now willing to commit only 2.5 million cu m per day from 2014 onward, due to non-availability of gas in the country, whereas the steelmaker is being asked to make investments according to the capacities originally envisaged under the joint-venture contract.

JSPL also said that the federal government did not provide substantial land for the project until 2010, and therefore work on the project could not start before that date.

“Even now, the full land requirement for the project has not been provided,” it said.

Until Bolivia decides how much gas it can actually supply and agrees to reconfigure plant capacity and investment, as well as to amend the contract, JSPL cannot consider continuing to invest in Bolivia, the company added.

Following JSPL’s announcement, Bolivia’s mining and metal minister, Mario Virreira, considered the company’s intended investment in Bolivia to be “poor”, according to the country’s official press, ABI.

Further, Virreira said that if the Indian company gives up on its Bolivian project, “there are several countries interested in investing in Bolivia and developing the [El Mutún] project”.