NMDC Back at the table?NMDC, Rio Tinto in shopping JV
Priyadarshi Siddhanta
Posted online: Wednesday, August 13, 2008 at 0120 hrs
Digging Deeper PSU minerals giant will buy mines overseas to boost rawmaterial reserves
NewDelhi, August 12: In its quest to become a global mining giant,state-run behemoth National Mineral Development Corporation (NMDC) will enterinto an alliance with global biggie Rio Tinto next week. The joint venture willbuy mineral properties in India and abroad.
The companies will sign the MoU on August 18.The equity base of the joint venture will depend on the acquisition of assets,among other factors.
Rio has been vigorously trying to enter India. The FIPB is understood tohave cleared one of its proposals pertaining to investment in the miningsector.
“The MoU will open a new gateway in acquisition of new mines and expansionof mining activities across the world. We will synergise our efforts in jointlyacquiring, exploring and developing mineral properties both within and outsidethe country,” NMDC chairman and managing director Rana Som told The IndianExpress.
Som’s assertions assume importance especially when NMDC is increasinglylooking overseas to consolidate its raw material reserves like its foreigncounterparts BHP Billiton, Rio Tinto and Vale. NMDC has already joined theInternational Coal Ventures Limited, the special purpose vehicle formed by theleading public mineral and metal companies of the country to ensure rawmaterial security. With no fresh allocation of iron ore mines in sight, NMDChas signed a joint venture with UK-based Spice Energy and is close to clinchinga deal for acquiring mines in mineral-rich Eritrea, Congo and Armenia, where itis investing Rs 2,000 crore for acquiring iron ore deposits worth 300 milliontonne.
The mineral giant is also in the frayto acquire a mine in resource-rich Canada, with reserves of 1 billion tonne, ata cost of about Rs 3,000 crore.
NMDC, which accounts for about 15 per cent of iron ore production in India,is currently operating three mines — two in Chhattisgarh and one in Karnataka.It plans to set up two units of 0.5 million tonne each in Chhattisgarh andKarnataka to make pig iron from iron ore slime. It has applied for eight miningleases in Karnataka and another one in Orissa. It is also investing Rs 50 croreto buy drilling machines to explore iron ore reserves in India.
A key reason why NMDC is keen to acquire mines overseas is to multiply itsnet sales realisation from overseas, which has not witnessed any increase incurrent trade with Japanese Steel Mills and Posco. So NMDC is now seeking up to97 per cent increase in iron ore prices from foreign steel makers, a move thatcould have similar repercussions on the domestic market, which may result inhigher steel prices.
Rio’s reported underlying profit of $7.443 billion in 2007-08, up 1.4 percent from 2006 on higher production and commodity prices. NMDC reported a 56.81per cent increase in net profit for the first quarter ended June 30, 2008.
• NMDC is keen to buy foreign mines tomultiply its net sales realisation from overseas, which has not witnessed anyincrease in current trade with Japanese Steel Mills and Posco
• It is already in a JV with UK-basedSpice Energy to buy mines in Africa
• It is also in the fray to acquire amine in resource-rich Canada at a cost of Rs 3,000 crore