Has identified two iron ore deposits in Australia.
NMDC is one of the five PSUs to have promoted International Coal Ventures Limited, a special purpose vehicle with the objective of acquiring coal properties abroad. But this has not stopped NMDC from looking at offshore coal and iron ore assets for possible acquisition. NMDC is approaching the subject in a way as to ensure that there is no conflict of interest between the joint venture and itself. In the event of an asset being eyed by both, the joint venture will have the option of walking away with the prize.
NMDC chairman Rana Som gives the impression of being obsessively keen to snap up mineral assets here and abroad in order to feed the country’s ambitiously growing steel industry. Som has also kept thermal coal under NMDC lenses. His thesis is since the country has major expansion plans for steel, the imperativeness of raw materials security and inducting technologies allowing production of the metal without the use of coking coal are not be underestimated.
The steel ministry says that on a most likely scenario basis, the country’s crude steel capacity would be nearly 110 million tonnes by 2012-13. But if we are to take our per capita steel consumption to the world average of 182 kg without import reliance, then we would need capacity of 300 million tonnes. As NMDC scouts for resources, both, within and outside the country, its record of environment friendly mining and a strong balance sheet will come handy.
NMDC’s intended portfolio diversification to now include coking coal must have got something to do with its downstream journey into making steel at two locations in Chattisgarh and Karnataka. Its mining activities in the two states have made it the country’s biggest producer of iron ore and of the highest quality. A large portion of its ore reserves has iron content of 64 per cent and more, making NMDC the preferred procurement source for local steelmakers in the public and private sectors.
Som has recently set his sights on a coking coal mine in the US with estimated deposits of 200 million tonnes. Unlike most PSUs known for their inertia and which perforce will play by the rule book, NMDC in this particular case moved at a lightning speed in starting due diligence of the asset. When it comes to iron ore, Som has his mind made up that any overseas acquisition of deposits will have to be at the exploration stage to keep costs low. Som says, “NMDC wants to come at the entry stage of exploration and then develop the mine slowly.”
NMDC has identified two iron ore deposits – one around 700 million tonnes of magnetite variety and another about 300 million tonnes of hematite kind – in Australia for possible acquisition.
Operating a mine in Australia will make good commercial sense for NMDC since bringing iron ore from there to Vizag will cost less than sending the mineral from Bailadila to Vizag by rail. But how soon does NMDC become a miner of thermal coal? “We will have that in our mining portfolio when we get hold of big reserves,” says Som.
Hopefully, some of the coal blocks in Chattisgarh, Jharkhand, MP and Orissa for which the company has made applications – a couple of these in MP have won approvals since – will fit in with NMDC scheme of things. Where NMDC is particularly aggressive in acquiring new deposits within the country is iron ore. It is only natural that the company so far engaged in iron ore mining in Chattisgarh and Karnataka is pitching for identical resources in action packed Jharkhand and Orissa. At the same time, the hunt is on to expand the resource base in its two home terrains to the extent of moving the court against allotment of some prospecting licences in favour of private steelmakers.
The immediate challenge for NMDC is to raise iron ore mining capacity by 20 million tonnes to 50 million tonnes by 2014-15, principally to meet the growing demand for the mineral from domestic steelmakers. The NMDC focus on selling high quality ore in the local market has seen its exports pegged at 10 per cent of yearly total sales. Som claims that the capacity target will be reached in time.
The seven-million-tonne Bailadila deposit 11B mine in Chattisgarh is fast nearing completion. An identical capacity project in Karnataka’s Kumarswamy is of strategic importance as it will compensate for depleting reserve of Donimalai. Project implementation is about to take off. Som is hopeful to start work on Bailadila deposit 13 of 10 million tonne annual capacity this year in an alliance with the Chattisgarh state agency CMDC. Give a couple of years, Bailadila deposit 4 will be developed with the same agency.
This year’s budget has stepped up export duty on lumps and fines to a uniform 20 per cent. But exports of pellets will be duty free, for there is value addition to fines. NMDC has not waited for the concession to start building a total pelletisation capacity of 3.2 million tonnes in two units. A smart move to convert low quality ore into a value added product.
