India’s NMDC firms up capex to lift production by 50%

KOLKATA (miningweekly.com) – Indian State-run miner NMDC, the country’s largest iron-ore producer, has firmed up capital investments of $324-million to increase production by 50%, to 48-million tons a year, by the end of 2020/21.

The State miner is committing higher capital expenditure and is significantly ramping up production to part mitigate the impending shortage of the critical steelmaking input, against the backdrop of numerous operational mines facing expiry of current mining leases (MLs) on March 31, 2020 and the government’s inability to complete the auction of fresh MLs before the expiry and avoid possible supply disruption to domestic steel producers.

According to company officials, the bulk of the incremental iron-ore production would come from NMDC’s mines in the central state of Chhattisgarh, where the local government has recently renewed MLs for four of its operational mines.

However, NMDC is hopeful of resuming production of at least seven-million tons a year from its Donimalai iron-ore mine in the southern state of Karnataka. The Karnataka government last year sought to grant renewal of the ML for Donimalai, but only subject to a condition that the miner pay 80% premium on sales value from production of the mine. The condition for renewal was rejected by NMDC and the latter shut down operations in November 2019.

However, company officials said that talks had resumed between the Karnataka government and the miner to resolve the logjam and facilitate the resumption of production from the mine at the earliest time. According to the company, resolution of the face-off had been facilitated by the federal Mines Ministry recently amending the Mines and Minerals (Development and Regulation) Act 2015 wherein it has been made mandatory for all state governments to renew MLs of government companies, which in effect left little room for the Karnataka government to set new conditions, including payment terms while renewing MLs.

Meanwhile, in a related development the Indian government announced divestment of 2.63% of equity held by it in favour of an asset management company.

The sale of shares from government holding has been conveyed to regulatory authorities and bourses where shares of NMDC are listed. Following the sale of shares, government holding in the mining company will come down to 69.65% from 72.28% at present.