Profitability of iron ore miner NMDC is set to rise from the next fiscal as its export commitment to Japan under a bilateral pact is coming to an end this year.
The exports, according to its chairman and managing director Narendra Kothari, are happening at a huge loss to the company.
"The commitment to export to Japan is ending this year. For new commitment the government has to decide but we are suffering heavy losses on this," Kothari said.
NMDC has been exporting about 5% of its total production to Japan and South Korea through MMTC according to a memorandum of understanding between the respective government based on an earlier decision of the Union Cabinet.
And that has turned into a great pain for NMDC as low margin exports have turned loss-making, according to a recent research note by brokerage firm Motilal Oswal Securities.
"NMDC is committed to export 2.8 million tonne a year to Japan and Korea under an MoU, and it earns lower margins due to high railway surcharge and export duty. With a fall in iron ore index to $79 a tonne and increase in royalty from 10% to 15%, NMDC will incur about $20 a tonne Ebitda loss," the report said.
While industry has been demanding that this pact be scrapped in view of domestic scarcity of iron ore, NMDC has been depending on the pact as a move to improve international relations.
On the international front elsewhere, NMDC is now closely eyeing several opportunities in Russia, including coal mines, where talks are already on for picking up stake in a potash manufacturing firm Acron in consortium with partners like Rashtriya Chemicals and Fertilizers (RCF).
"In Russia, we are looking at potash and, may be, coal. Our aim is mineral security. While our interest are in iron ore we are also looking at coal and potash. India doesn't produce any potash and everything is imported. So, we are looking at some investment in that," Kothari told reporters on the sidelines of Global Mining Summit.
Apart from picking up a 50% stake in Legacy Iron Ore of Australia, NMDC is now looking at opportunities to acquires mines in Indonesia, South Africa, the US, Brazil and South Africa.
NMDC is planning to produce 100 mt of iron ore by 2024-25, with own mines and joint ventures in India contributing about 90 mt while balance 10 mt flowing in from overseas assets.
"By 2018-19 we would be reaching 60 mt and by 2024-25 we would touch 100 mt. That is our growth plan. By March we would come out with detailed action plan for the 100 mt," he said.
Its work on the proposed three mt steel plant in the backward region of Bastar is progressing on schedule and is likely to get commissioned by December 2016.
"The work on the steel plant is at advance stage. Equipment erection is going on. It would be ready in another two years."
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