'NMDC will be the world's largest iron ore producer'

Mining major NMDC sees iron ore contributing significantly to its profitability going forward, notwithstanding the recent focus on coal and other minerals.

In fact, with new mines coming into its fold, it will be the largest iron ore mining company in the world in the next three years, N K Nanda, NMDC’s chairman and managing director (in-charge) and director (technical), tells DNA in this interview. Excerpts:

Is logistics a problem area for you?
Yes. We have a lot of capacity in our mines in Chhattisgarh and Donimalai (Karnataka), some 28 million tonne (mt) in all. The only difficulty we have in Chhattisgarh is in terms of logistics. It is a disturbed area. Currently, there is a slurry pipeline and railway lines for evacuating the ore. But, when the pipeline is down, we are facing difficulties in our production. We are taking necessary steps to counter it. In terms of railways we are participating in doubling the line between Kirandul to Jagdalpur on a stretch of about 135 km. NMDC will contribute about `800-1,000 crore. The project is at an advanced stage and we will sign the MoU by the month-end or the first week of March. We are also working on a slurry pipeline from, again, Kirandul to Jagdalpur. This is also attached to a beneficiation and pellets plant at Jagdalpur. This involves an investment of about `2,000 crore. All this will come by 2013-14 and our capacity will also improve very soon. By 2012-13, we will improve to 27 mt and by finding a solution to the logistics problems, it will increase further in the next year.

Are you increasing capacities?
We are working aggressively in acquiring mineral concessions within the Indian market. Recently, the Ministry of Mines has given us one iron ore deposit in Chhattisgarh — Deposit 4 — and one prospecting licence in Jharkhand. Today, we are in Chhattisgarh and Karnataka. Very soon, we will be starting our operations in Jharkhand. We have already stated that we are willing to work with any state government and do exploration free of cost.

We had asked for coal concessions and the government of India has given us an asset in Madhya Pradesh. We have already completed the mining plan and in 2013-14, we will start coal production in Madhya Pradesh.

What about the diamond project you’ve had for a long time?
The diamond project in Panna is doing very well. Good diamond bearing areas are exposed now. Our officers have told me that very good gem-quality diamonds are coming up in that area. Additionally, we also have two more diamond prospecting areas. We have already completed magnetic survey and we will start detailed exploration very soon. So, we will be growing very soon in iron ore, coal and diamonds.

NMDC has been talking about value addition for a while. What’s the status of those projects?
We aren’t looking at just mining. We are vertically integrating by setting up value-added plants. In Donimalai, we have gone in for a 1.2 mt pellets plant and it would be commissioned in 2013. This will bring a new product category to NMDC. The steel plant coming up at Nagarnar is at an advanced stage. The land acquisition is over and the statutory approvals are in place. Unique to a public sector, we have already placed `7,000 crore worth of orders. The project is on schedule and the production would commence in 2014 March. Interestingly, this will be the first steel plant in Bastar and the first project of this scale in a very remote area. We also have a magnesite plant in Jammu and Kashmir and this will be very useful for the country since the steel capacities are increasing and the market is depending on imports.

What kind of investments are you planning?
For the 12th Five Year Plan, we have earmarked an investment of about Rs30,000 crore for different schemes. One of them is a major steel plant in joint venture with Severstal of Russia.

The government of Karnataka has already started working on the land acquisition plan and by the first quarter of next financial year, the land acquisition will start.

What’s your capacity right now and how much would it be post your acquisitions?
Currently, we have about 32 mt capacity and the expansion, including two new mines — one each at Bailadila and Karnataka — will help increase it to 44 mt. In the next three years, NMDC will be the largest iron ore producer in the world.

What is the status of your venture with Tata Steel?
NMDC and Tata Steel have an MoU to develop a steel plant in Chhattisgarh jointly and there is a mine available for this. Once a formal agreement is signed, the work on the steel plant will commence. The agreements are still being examined by the boards of both the companies. The proposal is to have a capacity of about three mt. The financials are yet to be finalised since the techno-economic feasibility report is also yet to be prepared. But the product will be different from what NMDC would produce in its steel plant, so there is no competition between the two plants.

With exports not improving, what impact do you see on revenues?
In fact, if we don’t export, our revenues will improve. There is a 30% export tax and the company would benefit to that effect if there are no exports.

Besides iron ore and coal, what assets are you working on?
We are looking at fertiliser minerals like rock phosphate and potash. India is a net importer of these products. We have identified one rock phosphate mineral asset in Australia. We are actively engaged with them and by this month-end, we will start the due diligence. For coal, we are likely to invest about Rs300-400 crore and for diamonds, we are likely to invest over Rs100 crore.

What’s your plan for coal?
We are also looking for new coal block allotments and we will actively participate in the bidding process. In West Bengal, we have applied for a huge coal block. We have requested Coal India (CIL) to be with us. So, CIL, NMDC and two West Bengal government arms will jointly work on this block. Maybe there is more than two billion tonne capacity there. The asset there is covered with hard rock. Our participation in that venture will help bring the asset out since we are experienced in breaking the hard rock and bringing the asset out. In fact, it can be developed into a very huge coal field.

On the lines of adding value to iron ore by setting up a steel plant, any plans for coal?
Our MP coal block is a thermal coal block. Based on this, we are setting up a 230 mw power plant in Nagarnar to augment the power supplies to our own steel plant. We have called for expression of interest and several companies have come forward to participate in the project. We have already formed a SPV (special purpose vehicle) for power plant construction and the SPV will take care of all the clearances and providing the linkages. Then, we will have a JV partner to set up the plant. We will have about 26% share in the power produced. The plant is mainly going to be for captive purposes. Though we don’t have any plan to set up a commercial power plant for now, the proposed plant will give us about 130-150 mw for captive purposes and the balance is available for sale by the JV partner.

Where do you see the company by 2014-15?
By 2014-15, we will have revenues coming in from steel plant and pellet plant in addition to iron ore. Our revenue should be about Rs25,000 crore. On the revenue side, steel will contribute more, followed by iron ore and coal and other products. But the contribution of iron ore to the bottomline is going to be higher than any other product since it has an Ebitda (earnings before interest, tax, depreciation and amortisation) margin of about 85%. Mining and steel would continue to remain the core strength of NMDC. Our main focus will be to get more mines and make them standalone mines. We are not interested in setting up many steel plants.

What is the strategy behind acquiring assets overseas?
The international acquisitions are with a
focus on taking the country to the global  map. Maybe the business compulsions are different. If it is profitable to sell the product from those assets to bring to India, we will do so. If it profitable to sell it there, we will sell it there itself. Today, we have a lot of surplus fund to invest within the country. If we don’t get more properties here, we will invest outside the country.

What’s your guidance for the current fiscal and the next?
Of the 32 mt capacity, the production currently is at about 22 mt. In the next two months, we are expecting another 5 million tone production. So, we are likely to end the year with about 26.5-27 mt.

For FY13, we will produce about 27 mt and cross about Rs15,000 crore in revenue. The Ebitda will continue to be the same or improve a bit. It should have 80-82% Ebitda.

The present trend of prices is stable and there should also be some improvement. We have planned Rs3,655 crore capex for 2012-13.

A major portion of it would go towards the steel plant.
Your focus on CSR activities is also said to be on the rise...

We are focusing on four areas —- infrastructure, healthcare, employment and education. We are giving scholarships to 10,000 students in Chhattisgarh. Some of the tribal boys are admitted to management colleges in Hyderabad.

Five of them from Bailadila are being trained at the Institute of Public Enterprise. These boys, on completion of their course, will be placed as managers in our plant at Bastar. We could get about 30-35 girls from Dantewada district. They are going through nursing training at Apollo at our cost. These girls, on completion of training, will be employed in our hospital in Jagdalpur or other locations.