KOLKATA (miningweekly.com) - India’s largest iron-ore miner NMDC Limited has decided to fast-track investments worth $900-million during 2012/13 in an effort to better invest the company’s free cash reserves of almost $3.6-billion.

The investments would be aimed at increasing iron-ore mining and pelletisation capacities, as well as diversified projects to include coal mining, thermal power and the exploration of rock phosphate assets within India, and overseas.

A comprehensive investment plan has been drawn up by NMDC and a presentation would be made before officials of the Prime Minister’s Office (PMO) later this week.

The decision to speed up investment plans by dipping into the free reserves follows a directive from Prime Minister Manmohan Singh to all cash-rich government-owned companies not to sit on idle free reserves and bring forward project investments in order to bolster the sagging growth in gross domestic product.

“A report will be submitted to the PMO this week detailing our diversifications into related mineral exploitation and power generation apart from existing projects to increase iron-ore production,” NMDC chairperson and MD N K Nanda said.

“Diversification drive was also necessary because slow pace in award of new mines in our core area of iron-ore operations,” he added.

Though a detailed project-specific breakdown of the $900-million was not available, officials said that the company has earmarked investment of $200-million of the total investible corpus to increase iron-ore production by seven-million tons a year within the next two year. A corpus of about $50-million has been earmarked for the acquisition of rock phosphate assets in Australia and is scheduled to be completed within the current calendar year.

During 2011/12, NMDC initiated capital expenditure of $500.34-million to achieve a production target of 50-million tons, which included development of the Kumaraswami iron-ore reserves in the southern Indian province of Karnataka to extract seven-million tons a year.

This project had originally been conceived as a replacement for the company’s currently operational mine at neighboring Donimalai where reserves were nearing depletion.

The new investments would include a 1.2-million ton iron-ore pelletisation plant. This project has been conceived in anticipation of the Indian government announcing fiscal incentives, in the forthcoming Union Budget scheduled for mid-March, to increase iron-ore pelletisation capacities both at pitheads and integrated steel plants across the country by incentivising value addition of iron-ore and simultaneous discouragement of the export of iron-ore fines.

In the 2011 Budget, the government had also increased export duties on iron-ore to 20% from 15% resulting in a sharp drop of 30% in export shipments between April and November 2012.

The government estimated that fiscal incentives would facilitate the creation of new pellet plants. Of the total 220-million ton of ore mined in the country, current pellet capacity was only 18-million tons, NMDC officials said.

It was pointed out that few of the diversification projects planned by the company could have forward linkages to NMDC’s steelmaking facility currently under implementation in joint venture with Severstal, in Russia.

NMDC and Severstal were collaborating to construct a two-million-ton-a-year steel plant which would source coking coal from Severstal mines in Russia and iron-ore from NMDC mines in the first phase. The company’s fast-tracked $900-million strategic investment plan does not include the $5-billion investment that has been envisaged for the steel project.
 

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