Public sector miner NMDC, which has proposed an outlay of Rs 1,200 crore for overseas acquisitions during the current financial year, believes time is right to go shopping. It proposes to make these acquisitions partly through International Coal Ventures Limited (ICVL) and partly on its own.
The company is also hopeful one or more assets would get finalised by the end of the current fiscal as ICVL is carrying out due diligence of 4-5 assets of metal grade coal ranging from 50 to 500 million tonne. Metal grade coal reserves are mostly available in Australia, Mozambique, US and Canada.
“These are very opportune times as international coal prices have come down by 40-50 per cent and as a result, the market capitalisation of leading coal companies has shrunk. This is the right time to acquire assets overseas because beyond a level prices cannot go down, though it is difficult to say whether the prices have bottomed out,” said Steel Authority of India Limited (SAIL) chairman and managing director CS Verma, who also holds additional charge of NMDC as its chairman-cum-managing director.
Incidentally, both NMDC and SAIL are a part of ICVL, which was formed by five public sector companies including Coal India Limited, NTPC and Rashtriya Ispat Nigam Limited (RINL). SAIL and CIL hold 27 per cent equity each in ICVL with the other three companies sharing the remaining stake.
The consortium partner NMDC would be investing in overseas buys in proportion to its equity stake of 14.29 per cent.
While the early birds in the private sector are now at a disadvantage with the valuations of the recently-acquired coal and iron ore assets coming down due to pricing pressures on both the commodities, Verma sees the current valuations at a realistic level to enter the market.
Global prices for iron ore have come down to less than $100 per tonne from $200 per tonne a year ago and from $150 per tonne just six months ago. Similarly, coking coal prices have declined to $175 per tonne from $300-325 per tonne a year ago.
According to Verma, the evaluation of assets through ICVL is at a fairly advanced stage and negotiations with the owners of these assets are also on. Besides, NMDC has also entered into non-disclosure agreements and submitted bids on its own for some assets in Tanzania (for gold mines) and a couple of coal assets in South America. The company is also looking at acquiring other mineral assets, he said.
A part of the overseas capex for the current year would also go into the development of Legacy iron ore mine it had acquired in Australia last year. The investment plan for this would be discussed in the next board meeting.
According to Verma, most of the company's current year's capex of Rs 4,656 crore, excluding the Rs 1,200-crore overseas investment component, would go into the Nagarnar Steel plant, which was approved with a project cost of Rs 15,525 crore, and a portion of it would be utilised for the development of Kumaraswamy and Bailadilla iron ore mines. The company had already placed orders worth Rs 13,000 crore for the steel plant and, so far, incurred an expenditure of Rs 1,221 crore.
Perspective plan
NMDC is in the process of preparing a perspective plan till 2020 in which it will identify areas of value-addition both through forward and backward integration, including maximising investments in pelletisation.
The company has also set a target to achieve a 40-million tonne iron ore production capacity by 2014-15 and 50-million tonne by 2020 from the current 32 million tonne.
The proposed increase in iron ore production is in line with the new capacity additions in steel production, which, according to Verma, would go up to 110-120 million tonne by 2013-14 as compared with the current installed capacity of 80 million tonne and an actual production of close to 76 million tonne in the country.
“Besides this, we are laying proper emphasis on drilling and resource planning in a bid to increase the resource base,” he said, adding the company had approved the highest-ever capex of Rs 30,072 crore for the 12th Five Year Plan.
