JSPL to start Bolivia iron ore sale from this quarter

The Naveen Jindal-led Jindal Steel and Power Ltd (JSPL) plans to start sale of iron ore from its huge ore reserves in Bolivia this quarter.

Sushil Maroo, director and group chief financial officer, JSPL, said though the company cannot give an exact date for the start of sale from its Bolivian reserves, it plans to do it in the first quarter.

He said the company is also looking at setting up a pellet plant at the Bolivian site, but no dates have been freezed so far. “We want to sell iron ore in the first year, though there is no target or plan as to how much we will sell,” Maroo said.

The company has access to close to 40 billion tonnes of ore reserves in the El Mutun mines in the Latin American country and plans to set up a 1.7 million tonne steel plant.

It has been talking of starting production from the mines since it received a nod from the Bolivian government in August but nothing substantial happened since then.

“Even if it starts selling from the first quarter, the numbers will reflect only in the second quarter and, that too, will not be too significant,” said head of research from a leading domestic brokerage house.

It will take time for the company to raise production and sale to substantial levels which will happen over a two to three years. “It takes time to build a critical mass in the case of activities like mining,” he said.

The main issue with the Bolivian mines is that it is in a land locked area. “It is more of an infrastructure issue than a company specific one,” said another analyst from a leading domestic brokerage house.

He said once the company overcomes the infrastructure roadblocks, it will be able to produce and sell not more than 1-2 mt per quarter for the first few quarters.

“It will not add significantly to the company’s topline and bottomline. But the only positive is that it will give confidence to investors who had started discounting Bolivian operations,” he said.

The company has a target to produce 20 mt per annum from the El Mutun mines.

Maroo said JSPL will take a final call on the proposed Rs7,000 crore initial public offering (IPO) of Jindal Power, the company’s power arm, “shortly”.

“As you know, the IPO deadline is on May 27, 2011. Although we haven’t decided on anything, but we will do it shortly,” he said.
He said for the current financial year, the company has set a capex target of close to Rs7,500 crore on its more profitable venture of power and over Rs5,000 crore on its flagship operation of steel.

“Out of 1,000 mw, we sold close to 700 mw on merchant basis at an average tariff of Rs4-4.50 per kWh in last year,” he said.

While the company plans to keep the ratio at the same level, he said the merchant tariffs are likely to average Rs4 per kWh for the current fiscal.

For the year ended March 2011, JSPL posted an 18% rise in consolidated turnover of Rs13,111.60 crore, up from Rs11,091.54 crore in the previous fiscal.

Its net profit for the same period rose 5% at Rs3,804.01 crore from Rs3,634.56 crore on-year.