NMDC to ramp up iron ore production to boost supplies

Bloomberg Mumbai | Updated on February 12, 2020

To spend about ₹2,300 crore in capital expenditure next year to raise the output

India’s biggest iron ore miner plans to raise production by as much as 50 per cent, potentially boosting supplies and alleviating concerns of shortages of the key raw material.

State-run NMDC Ltd. is targeting production of 48 million tonnes in the year starting April, and will surpass 32 million tonnes this year, Amitava Mukherjee, director of finance, said. The growth in supplies will come mainly from its mines in Chhattisgarh and includes 7 million tonnes of iron ore from the Donimalai mine in Karnataka state that is currently closed.

The company is positive on restarting the Donimalai mine, Mukherjee said. The Karnataka government withdrew the lease for Donimalai in November 2018 after NMDC denied higher royalties from profits demanded by the state. In October, the Centre tweaked mining rules to make the renewal of mining leases belonging to state-run companies mandatory without going through the auction process. While the matter is now pending with a Mines Tribunal, the new rules favour NMDC.

NMDC’s plans to raise production come as concerns rise that delays in the auctions of mines whose leases expire in March could squeeze domestic iron ore supplies. The government has been trying to boost supplies to mitigate any shortfall next year, including by extending environmental approvals for leases of mines due to expire by March.

Appetite for the key steel-making raw material is set to increase as Prime Minister Narendra Modi plans to spend $1.5 trillion on energy, road and railway projects in the next five years, boosting steel demand.

As a merchant miner, we see a lot of positives in whatever is happening apart from the fact that iron ore production and prices itself are on an upswing, Mukherjee said.

NMDC plans to spend about ₹2,300 crore in capital expenditure next year to raise production, add a slurry pipeline, and also develop two new coal blocks allotted by the government, Mukherjee said. Funding for projects will be from internal cashflows but sooner or later we will have to leverage, he said.

Published on February 12, 2020

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