JSW Steel close to acquiring London Mining

JSW Steel has almost clinched a deal that would see India's third-largest steel company acquire embattled London Mining (LON:LOND), sources close to the negotiations revealed on Friday.

"JSW Steel is very close to finalizing a deal to acquire London Mining which is battling big debts amid crashing iron-ore prices and the Ebola outbreak in Africa, where it operates a mine," Moneycontrol.com of India quoted a source as saying.

While the news outlet was stonewalled by JSW in its attempt for a comment on the rumour, it noted JSW's open-ness to expansion through acquisitions.

"As a long term strategy, we would like to expand both organically by means of brownfield and greenfield expansions and inorganically by acquiring some existing assets," according to a filing by JSW on the Bombay Stock Exchange. 

Controlled by billionaire Sajjan Jindal, JSW may just be the white knight that LOND needs to make a comeback. The steelmaker has been eyeing up raw materials and steelmaking capacity outside India having secured mining assets in Chile, Mozambique and the United States, according to Reuters.

London Mining has seen its equity decimated in recent days due to statements that its lenders are not expecting to provide short-term funding. On Wednesday, the firm admitted to investors that its shares "have little or no value" due to funding fears. Rumours of a takeover, however, caused LOND to triple on Friday, with shares trading up 235 percent.

London Mining, which owns the Marampa mine, is one of several small miners set up in West Africa during the commodities boom, on the back of rising demand for iron ore. They hoped to turn the region into a new producing frontier, to compete with Australia and Brazil.

But with larger, lower-cost producers like Rio Tinto (LON:RIO, NYSE:RIO) and BHP Billiton (NYSE:BHP, ASX:BHP) pumping out cheaper ore – and prices languishing below $80 per tonne – they have struggled.

The miner is just one of the most recent casualties in the iron ore market. Companies big and small are suffering from record low prices for iron ore in the face of oversupply and weak demand from key consumer China.

BHP acknowledged last week that some projects would be casualties of the lower price for iron ore.