NMDC investing Rs 2,500 cr to raise ore output

Business LineThursday, Oct 08, 2009

Hyderabad, Oct. 7 National Mineral Development Corporation (NMDC) has lined up a

capital expenditure programme of Rs 2,500 crore to increase the capacity of its ore
production from 30 million tonnes to 50 million tonnes by 2014.India’s largest producer
and exporter of iron ore expects a spurt in demand for iron ore in the domestic market,
as the steel sector has significant expansion plans. NMDC exports about 15 per cent of
its production and the rest is used by domestic steel plants.

New mines

To start with, the Hyderabad-based company will open four mines in three years, Mr
Rana Som, Chairman and Managing Director, told Business Line. The new 11B mine at
Bailadila will be operational by September 2010, while the Kumaraswamy mines in
Karnataka are expected to start production by 2011.

“We are opening another mine in Chhattisgarh which will be through a joint venture with
Chhattisgarh Mineral Development Corporation (CMDC). We are yet to get forest
clearance for this mine and hence it may not become operational before 2012. Opening
of deposit-four in Bailadila is also in the pipeline — this will also be through a joint
venture with CMDC,” Mr Som said.

In Jharkhand, the company is looking at Ghatkuri iron ore deposits for exploitation
through a joint venture with the State Government, while in Orissa it is targeting the
Mankadnacha deposits. NMDC has also formed a joint venture with CMDC to develop
deposit-13 in Bailadila as a standalone project of 10 million tonnes.

Production dips

The company may see a marginal drop in iron ore production this fiscal, as there was a
dip in the first half of the year. “It is not because of our productivity, the problem is one
of evacuation. We are confident of making up for the fall in the second half of the year,”
he said.

NMDC sales fell by 22 per cent during April-August at around 9.27 million tonnes from
11.84 million tonnes in the year-ago period. During the same period production dropped
by nearly 9 per cent to about 9.5 million tonnes.

Ore from the Bailadila mines is evacuated through the Kottavalasa-Kirandul line that
ends at Visakhapatnam, after traversing through high-altitude regions. The railways are
supplying 12 rakes daily for evacuation of the mineral, but NMDC needs about 16 to 17
rakes. “I have written to the railways for increased rake supply,” the NMDC chief said.

NMDC has been hit by a drop in both global and domestic prices of iron ore. “While in
the global market, price of ore fines declined 33 per cent, that of lump fell 44 per cent as
compared to the previous year. In the domestic market, the impact will be about 20 to
25 per cent,” Mr Som said.

This would have some impact on the company’s bottomline this year, he added.

The global prices of ore lumps and fines are ruling at $71.5 and $61.5 respectively, as
against $121 and $129 a year ago.