NMDC swooping in on six mines abroad

State-owned miner NMDC is in advanced stages of negotiations to acquire six mines in Australia, Mozambique and Albania.

These include three coal and three iron ore mines.

“We have finalised acquisition of two iron ore mines in Australia. We should be able to announce the acquisition before the end of March 2011,” Rana Som, NMDC’s chairman and managing director, said.

The remaining mines would be acquired over a period of time.

NMDC would have controlling stake in all the mines that are being targeted for acquisition. However, it would involve partners in some of the mines.

“Among the two mines that are ready for acquisition this year, we would involve a partner in one of the projects. The other would be completely with us,” said Som.

He, however, refused to comment on the expected reserves in the mines.
Considering the capital intensive nature of acquiring mines that are ready for production, NMDC is targeting mines that are yet to reach development stage.
“Because of this strategy, we would not require much capital at the initial stage. But, when the mines reach the development, we may have to look at pumping in more funds,” he said.

Asked if the acquisitions need $100-200 million, Som said, “It would be much less than that.”

NMDC expects iron ore prices to harden in the immediate term, though they would stabilise during the middle of next financial year.

“The next financial year (2011-12) should start with higher prices. Due to the natural calamities in Australia, there is pressure on supply side affecting the global prices. The stabilisation in Chinese production would have a downward impact on the prices at some point. But, the Chinese effect would be nullified to some extent by the recovery in the steel sector, particularly in European, US and Japanese markets,” he said.

For the quarter ended December, NMDC reported a drop of about 40% in exports.

“The drop in terms of percentage looks big since our base is low. We export not more than 9-10% of the total production. Anyway, we are not keen on expanding our exports considering the market within the domestic market,”
said Som.

He said, “It is also important for us to look at how much money we realise through exports. The tariff on exports in the railways is more than three times the domestic freight. So, most of the earnings through export would go towards the freight. For instance, we export high-grade ore to Japan. There is huge demand for ore of that quality in domestic market as well.”

However, the company is not in a mood to abandon a market like Japan only on the grounds of it being not very remunerative.

“Japanese market has been developed over a period of 35 years. So, we have to be doubly careful before abandoning such a market. At the same time, exports should be profitable for us,” Som said.