India’s largest iron ore miner NMDC Limited, which is expanding its geographical footprint, is currently in the process of acquiring two coking coal projects in Russia and Australia, besides an iron ore mine in Brazil involving an initial investment of over $500 million.
According to NMDC in-charge chairman and managing director NK Nanda, due diligence of both the coal projects has started, while a similar exercise would be undertaken in the case of the iron ore property in the second half of this month.
Nanda told Business Standard that the state-owned miner was currently holding discussions with Carabella Resources of Australia for acquisition of the latter’s 50-million-tonne coking coal project. The cost of the acquisition was estimated to be in the range of $ 150-200 million.
“We have signed a non-disclosure agreement in this regard,” Nanda said, adding that due diligence of the property would be completed by this month-end.
As per the preliminary estimates, this project, which involves open cast mining, requires an overall capital expenditure of around $1 million.
Nanda said that NMDC would be using Legacy Iron Ore Limited for acquisitions and development of mineral assets in Australia. The company has acquired 50 per cent equity in the Australian firm last year and inducted three directors in it with Nanda as chairman.
The other assets the company is following in Australia for some time included a rock phosphate mine which is now under due diligence process. “Once it is over, we may go ahead with the acquisition process,” Nanda said.
Nanda said that NMDC had also signed a non-disclosure agreement with regard to the acquisition of a coking coal mine in Russia. This project has an estimated coal deposits of 80 million tonne.
Though the cost of acquisition of the Russian property was yet to be worked out, it could cost more than the Australian mine as it has more coal deposits. The iron ore mine NMDC is eyeing to acquire is located in northeast of Brazil, about 165 km from the Port of Santana. It has deposits to the tune of one billion tonne.
Nanda said that the initial investment on this mine would be $200 million. Of this, $100 million would be for acquisition and an equal amount for exploration and development.
This apart, he said, the directors of South Africa’s Kopano Ke Matla Investment Company, a joint venture partner of NMDC, would be coming to India in the third week of this month and “finalise some promising acquisitions”.
NMDC had entered into a partnership with Kopana last year for acquisition of iron ore, coal and manganese assets in South Africa.
The company’s director (finance), S Thiagarajan, said that the contribution of foreign ventures to NMDC revenues was likely to go up to 50 per cent in the long run.
Domestic operations
NMDC had planned a capital expenditure of Rs 3,655 crore for 2012-13, a major chunk of which would go for the 3-million-tonne per annum (tpa) steel plant it is setting up at Nagarnur, near Jagdalpur in Chattisgarh. The company is also set to start operations of an iron ore in Jharkhand and two coal blocks in Madhya Pradesh.
Nanda said that NMDC would be signing a memorandum of understanding with the railways for doubling of the 135 km track from its iron ore mining area in Kirandul to Jagdalpur. It has been approved by the railway board and NMDC would be advancing Rs 850 crore for the Rs 1,000-crore project. Railways will return the money to NMDC after completion of the project in 5 years. Thiagrajan said that doubling of the track would enable NMDC to evacuate an additional 5-7 mta. The company is currently evacuating 15 mta of iron ore from this area.
NMDC is also planning to set up a 10 mta pipeline at a cost of Rs 2,000 crore for evacuation of iron ore from Bailadila sector to Visakhapatnam. This will help in enhancing iron ore supplies to companies like Rashtriya Ispat Nigam and Essar Steel.
