NMDC says may face ore-price hit in third quarter

Mining major NMDC’s growth may be hit this year on account of a likely drop in iron ore prices in the third quarter.

Though the company did not disclose the level of the drop and the factors that may bring down the prices, it is gearing up to face its impact on financial performance, too.

“We had an excellent first quarter and the second quarter would be better than that. However, we are looking at the third quarter when the prices would fall,” Rana Som, NMDC’s chairman and managing director, said.

When asked for guidance on performance for the current fiscal, he said, “In the third quarter, the prices will not be as high as in the second quarter. At this point, it is difficult to talk about the full year since we are not looking beyond the third quarter.”

Though there were Naxal-related and other issues for the evacuation of iron ore from the mining area in Chhattisgarh, the company was able to record good performance and would continue to do so in the current quarter as well, he said.

The company secure a coal block in West Bengal is said to be in the final stages and is currently awaiting the final clearance from the coal ministry for acquiring a coal block in West Bengal.

“In West Bengal, we have found a two-billion tonne coal mine. Along with us, Coal India, too, had applied for the mine. Now, we are forming a joint venture with Coal India to jointly take up the mine,” he said.

The JV would be an independent coal mining company and NMDC expects at least 25-30 mt coal from the West Bengal mine.

Similarly, the company is also expecting clearances for two coal mines in Madhya Pradesh. Overseas, the company is trying for a “number of coal mines.”

“Since we have signed confidentiality agreements with some of the potential partners for overseas coal mines, we can’t disclose the names at this point. But, we are pursuing a number of coal mines abroad and there would be some clarity on the way forward in the next 3 months,” Som said.

NMDC, after taking over Sponge Iron India, has been trying to revive the loss making company. Initially, it had planned to expand the capacity of the company from 16,000 tonnes to 3 lakh tonnes.

However, there seems to be a change of plan.

According to Som, Sponge Iron India was not doing well due to low capacities, high manpower and low prices for sponge iron.

“But the prices of sponge iron continue to remain low and instead of think linearly about sponge iron alone we are now looking at other ways of making use of the assets at the company,” he said.

NMDC had signed an MoU with the Japan-based Kobe for technology.

As part of this, the company is now roping in Kobe to set up a state-of-the-art iron nuggets unit at Sponge Iron’s site.

“There is land available for us to set up a unit. We are currently conducting a feasibility study and it should be done by September-October. However, if decided, the iron nuggets unit would have a 3-5 lakh tonne capacity. In fact, Kobe has a 0.5 million tonne facility in the US. Iron nuggets have 95-96% steel and they can be used directly in the steel mills,” he said.

If all goes well, NMDC will set up a JV with Kobe bringing in the technology to manufacture iron nuggets at Sponge Iron India’s campus.