MOIL plans volumes play to offset depressed prices

MOIL Ltd, India’s top manganese ore producer, is planning to increase sales by 30% in the current fiscal to offset the impact of depressed prices.

The company, which got listed on the Bombay Stock Exchange in December at Rs591 a share, had seen a steady erosion of its market capitalisation with the scrip dropping about 40% to touch a new low of Rs352 on Tuesday.

KJ Singh, chairman and managing director, MOIL, said the company will increase its sales 30% to 1.3 million tonne in this fiscal from the last. “We have reduced prices almost 23% since April and will make up for loss by increasing sales,” he said.

The company sees prices rising in the next quarter. “The prices have already bottomed out, and from here they can only rise,” said M A V Goutham, director - finance, MOIL.

The company posted average realisations of Rs11,645 per metric tonne (mt) in the first quarter, Rs11,786/mt in the second quarter, Rs10,025/mt in the third and Rs9,376/mt in the fourth quarter of the last fiscal. “The realisations for the first quarter are expected to be even less,” Goutham said.

However, MOIL sees realisations rising one once the monsoon begins.

Singh said during monsoon most of the open cast mines across the globe witness a fall in production reducing supply. “Out of the ten mines of MOIL, seven are underground and we do not anticipate any major production drop and can suffice the demand,” he said.

Goutham said that increase in sales volumes will be met by an increase of production to 1.2 million tonne this fiscal from 1.1 million tonne last fiscal plus sale of its inventory of close to 1,08,000 tonnes.

MOIL is also expecting the prospecting licence for the 814 hectares of manganese ore bearing land offered to it by the government last year.

“Once we get the licence, we can start exploration work and ascertain the reserves, which can give further visibility to our reserve potential,” Singh said.

Despite the current depression in prices, manganese ore will move in tandem with the steel demand, in fact faster due to consumption by ferro-alloy players as well, he said.

The company is also planning to double the capacity of its Gumgaon underground mine to 75,000 tonnes by the second half of this fiscal.

However, analysts said an oversupply situation, with the steel industry growing at 8-10% and manganese ore at a much faster rate, could cause further fall in prices.

However, Singh said sustained domestic steel demand ensured a market for MOIL and any rise in demand could be met by the company. “We can also meet the import demand,” he said.