Tuesday, December 21,
NMDC Ltd., India’s biggest iron-ore producer, plans to buy a mine in Australia after an alliance with Rio Tinto Group to jointly purchase and develop reserves in India and overseas stalled.
The acquisition, NMDC’s first outside India, will be completed in about two months, Chairman Rana Som said in a phone interview, without disclosing the price or target.
Limited expansion opportunities in India because of violence by Maoist rebels and delays in granting permits for new mines prompted NMDC to look offshore.
“In India, iron ore is a case of water, water everywhere, and not a drop to drink,” said Prasad Baji, an analyst at Edelweiss Securities Pvt. in Mumbai. “Approvals aren’t coming for new mines and the Maoists are making operations difficult at existing ones. State governments are more likely to grant new leases to steel companies rather than mining companies. So, what does a company like NMDC do? Look overseas.”
The company needs supplies for its proposed steel mills in the southern state of Karnataka and the central state of Chhattisgarh, Som said yesterday in the interview.
“We may have surplus iron ore today, but we will need it tomorrow,” Som said. “It’s a precious natural resource and the Australian asset will do us good in the long term.”
India has increased freight charges and taxes on iron ore to ensure supplies for planned new domestic steel plants. The increased cost, combined with a ban on exports from Karnataka, India’s second-biggest iron ore producer, may lead to a 38 percent drop in overseas sales this fiscal year, according to federation estimates.
Exports may decline to 66 million tons in the year ending March 31 from 106 million tons the previous year, the federation said on Aug. 23.
Source: Bloomberg
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