NMDC plans to boost iron ore output by two-thirds

MUMBAI Wed Jul 23, 2014 1:31pm IST

A worker levels the iron ore in a freight train at a railway station at Chitradurga in Karnataka November 9, 2012. REUTERS/Danish Siddiqui/Files

A worker levels the iron ore in a freight train at a railway station at Chitradurga in Karnataka November 9, 2012.

Credit: Reuters/Danish Siddiqui/Files

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MUMBAI (Reuters) - NMDC Ltd, India's biggest iron ore producer, aims to ramp up output by two-thirds in five years to 50 million tonnes a year, helped by the launch of new mining facilities and expansion of existing infrastructure, its chairman said.

State-owned NMDC's plans will add to surging global growth in output of the steelmaking raw material, although a push by the new government to revive manufacturing and industrial growth may boost domestic appetite for iron ore.

NMDC, which produced close to 30 million tonnes of iron ore in the year that ended in March, or close to a fifth of the country's production, aims to mine about 32 million tonnes this year and reach its target by 2018/19.

"There is a natural demand for iron ore in the country, we don't have any shortage of demand ... whatever we produce, we are able to sell," Narendra Kothari, who took over as NMDC's chairman in April, told Reuters in an interview.

NMDC is currently enhancing output at its three existing mines in Chhattisgarh and Karnataka and is in the process of securing leases for mines in Jharkhand.

It has also gained from curbs on illegal mining in Goa and Karnataka states plus the closure in May of nearly half the mines in Odisha, the top producing state, ordered by the Supreme Court while leases dating back years were renewed.

Kothari said he expects international prices for iron ore to firm up in the near-term.

Iron ore prices have recovered slightly after the increase in global supply available to top consumer China pushed prices to a 21-month low of $89 a tonne in June. They closed at $95.40 a tonne on Tuesday.

"I feel international price should remain in the $95-$105 range for the next six months," Kothari said.

MORE EXPORTS

NMDC, which fixes prices every month, raised its prices by up to 9 percent in June, taking advantage of the cuts in supply from Odisha and elsewhere that had prompted some domestic steel makers such as JSW Steel Ltd to import the raw material.

"Our quality of iron ore is much better than anyone else in the country so we can demand a little higher price than the market," Kothari said.

NMDC's mines produce ore with higher iron content which are preferred by local steel mills. Every percentage point increase in iron content improves productivity by 2 percentage points, according to the Indian Bureau of Mines.

Kothari said NMDC would target exports of about 8 percent to 10 percent of total production a year, up from about 6 percent in the year ended March 2013, as it seeks to focus on companies in Japan and South Korea.

"Demand (for exports) is much more, but due to the requirement in the country, we are not exporting much," he said.

STEEL PLANT ON TRACK

Kothari said NMDC was on track to meet a 2016/17 timeline to set up a 3 million-tonnes-a-year steel plant in Nagarnar in Chhattisgarh and would invest about 20-25 billion rupees ($333-$416 million) this year on the plant.

India currently owns 80 percent of NMDC and will have to offload a 5 percent stake after the market regulator said last month the state should cut its holdings in listed companies over the next three years to a maximum 75 percent.

Kothari said there was an "indication from the government" to divest, but the timing of a possible share sale was not confirmed.

Kothari, who also sits on the board of International Coal Ventures Ltd (ICVL), a consortium of five state corporations, said NMDC was looking for coal assets overseas as part of the group.

ICVL, which has been scouting for coal assets since 2009 but is yet to complete an acquisition, is likely to submit a $200 million bid for Rio Tinto Ltd's coal mines in Mozambique, local newspapers reported this month.

"We had gone to Mozambique to see some properties and now we are discussing further about these properties," Kothari said. He refused to comment on the media reports.

($1 = 60.0950 rupees)

(Editing by Alan Raybould and Muralikumar Anantharaman)

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