As part of its overseas expansion plan, National Mineral Development Corporation (NMDC) is acquiring two iron ore mines in Australia by taking a management control of 51%. The state PSU has identified three iron ore and three coal mines and has taken the board?s approval for the proposed acquisition of two iron ore mines, according to Rana Som, CMD, NMDC.
Speaking to the media on the sidelines of the sixth national convention on ?Globalisation through Global Compact: Towards a Sustainable Business? organised by NMDC, Som said the targeted assets would entail an investment of less than $100 million without giving further details on investment and names of the mines. The deal is expected to be sealed in the first week of March.
?The acquisition cost is not a big investment but would necessarily become an asset as when we leverage our abilities after a long term investment,? he said, adding that NMDC has also found a partner for one of the asset to be acquired. Besides the two identified mines, NMDC has identified iron ore and coal assets in Australia, Mozambique and Albania.
?Acquisition of ready assets are expensive if the company intends to have management control with about 51% stake or more. But these assets have high returns and banks and financial institutions are forthcoming to extend financial assistance,? he added.
Meanwhile, NMDC is re-valuating its two-year-old agreement with Anglo-Australian mining major Rio Tinto to jointly work on iron ore assets in India and overseas. Both companies had signed a pact in the year 2008 but was left with no progress till date. ?There was a small lull period, but it can be renewed with vigour. We will be resuming more exhaustive deliberations with Rio Tinto to work together,” he said. The deal had faced some environmental and structural problems which pulled the trigger on the progress.
Talking about the high iron ore prices, Rana Som said the the financial year 2011-12 may see higher prices due to supply side constraints and natural calamities in Australia. ?While we see an increase in the prices due to these forces, we also see another force with steel sector improving in the US and Japan which will improve the demand side,? he said. However, as Chinese steel production are also going to stabilise at certain levels, this will also prevent iron ore prices from being hiked further, he added.
On export to the Japanese market, Som said a decision regarding continuing exports to Japanese market is likely to be taken in a month or two. Explaining the reasons for going slow on exports, he said that the export tariff on railway freight is three times more. Incidentally, there is a huge demand within the country as well. “We are doubly careful before abandoning the Japanese market. But at the same time, we are careful that exports should be profitable,” he added.