That NMDC deserves to receive the Maharatna status has been seen from its high market capitalization. Ranked at 12 in terms of India's top listed companies, NMDC has a market capitalization of over Rs. 1,10,000 crore — the fifth highest among all state-owned companies (which include India's largest bank the State Bank of India).
In fact the largest state-owned steel giant SAIL is way behind NMDC in terms of market capitalization — at Rs. 69,266 crore as on 25th March 2011. What makes NMDC a more sought after company than the likes of SAIL, TATA Steel et al?
The leadership is one factor. NMDC chief Rana Som is always on the look out for creating a future for his company. India's largest iron ore miner is now busy setting-up greenfield steel plants - in the resource rich states of Chhattisgarh and Karnataka. What is more in order to meet the possible need for coking coal — not available domestically — NMDC is now all set to acquire coking coal mines in British Columbia, a Canadian province apart from US and Russia.
At a trade event in Canada recently, the British Columbia government had invited Indian companies to invest in mining companies in the province. Both NMDC and Tata Steel had expressed interest in acquiring mines in the mineral rich region. For Tata Steel global acquisition has now become part of its existence. But to move in such a fast pace is something new for India's state-owned NMDC. The fast decision is what makes NMDC stand above others in India today.
NMDC chairman acknowledged the steps his company initiated, “We have discussed with geologists and also with the concerned minister for mines on the availability of coking coal properties in British Columbia. The province's officials had briefed us on picking up stake in coking coal mines there. But we are more interested in acquiring a mine and operating it rather than just picking up stake.”
According to the Canadian government website, British Columbia has over 20 billion tonnes of coal resource for surface or shallow underground mining. For coal bed methane exploration, the coal resource available upto a depth of 2,000 metres is over 250 billion tonnes.
Meanwhile NMDC has moved closer in its bid to acquire a coal mine in the US. The company is in talks with the promoters of mid-sized coking coal mines in Pittsburg and Alabama. It is in the process of completing the due diligence prior to making an offer. The Navratna PSU is making every effort to secure coal for its captive needs for the steel plants in Chhattisgarh and Karnataka.
CMD Som was candid, “We are keen to acquire good mining assets both in iron ore and coal. In iron ore, we would look at merchant sales. However, for coal we are interested in securing long-term linkages for our upcoming steel plants.”
Earlier NMDC was seen active in acquiring the coal mines of Russia's Kolmar Coal. It has now appointed Deloitte Touche Tohmatsu India Pvt Ltd as a financial adviser for the purchase of three coal mines of Kolmar. Market sources expect that the transaction will be completed by May this year.
Indian companies have been competing with leading Chinese coal miners such as China Shenhua Energy Co. Ltd and Yanzhou Coal Mining Co. Ltd for acquiring mining concessions overseas.
News reports that have appeared in the past have valued the three mines owned by Kolmar at $400 million.
Sources said the actual deal price may be different from the estimate. If NMDC does manage to buy the Kolmar mines, it would get a supply of one million tonne a year of mostly coking coal immediately.
Analysts said NMDC's attempts to buy an overseas mine was timely as coal shortages are projected to widen in future, but there might be risks involved in mining overseas. These properties are estimated to have reserves to the tune of 100-200 million tonnes. As per current valuations, a mine of such a size would be in the range of about $300-400 million, estimate industry analysts. Apart from bidding for Kolmar NMDC along wth two other companies had also submitted a $230-million non-binding bid to buy a 70% stake in an Australian mine owned by Perth-based Atlas Iron.
Clearly Som will leave no options untried. He is determined to take NMDC to a new level among India's state-owned companies.
Looking for properties to feed its plants is one part of Som's strategy, partnering strong allies is another. In December 2010, NMDC and Severstal agreed to build a steel plant for about $1 billion, the largest Russian investment in the metals sector. While the capacity of the plant will be two million tonnes, it is likely to be scaled up to five million tonnes later. The proposed plant will mainly make auto grade and electrical steel. Severstal itself has huge coking coal properties in the US.
The Karnataka joint venture is NMDC's second steel project. The first one with a capacity of three million tonnes is proposed to come up by 2014 at Chhattisgarh at an investment of Rs. 15,000 crore. The company is also in talks with Tata Steel to ink an equal joint venture for setting up a 2 million tonne per annum steel plant at Bastar in Chhattisgarh.
The volatile raw material prices seen during the last few years is a major concern for steelmakers globally. Coking coal and iron ore are the two key inputs for steel, accounting for more around 85% of the raw material cost. NMDC has rich iron ore assets but needs coking coal. Therefore to ensure raw material security for its upcoming steel plants in Chhattisgarh and Karnataka, Som is looking at acquiring coking coal mines. In fact the NMDC Chairman admitted that his company was close to buying two iron ore mines in Australia, while it was targeting three coking coal assets in Australia, Mozambique and Albania.
“We are targeting six assets, with primarily three iron ores and three for coal in Australia, Mozambique and Albania. We have already located and almost finalised acquisition of two iron ore assets,” Som had said.
NMDC accounts for 15% of the country's total iron ore production. It targeted to produce 30 million tonne of iron ore during the financial year 2010-11. It plans to invest Rs 3,309 crore on expansion projects in 2011-12, and a bulk of the amount will be spent on building the 3 million tonnes steel plant in Chhattisgarh.
Rs. 2,615 crore has been earmarked for NMDC's Chhattisgarh plant. Som said that “work on the Chhattisgarh plant is on full stream and it will be constructed on time. It will be the fastest developed steel plant in the country.”
Som knows what he must do is walk the talk. For last couple of years market speculation on NMDC acquiring assets abroad and setting up plants in India have been strong. NMDC has not denied such speculations. In fact the PSU has already initiated work on its Chhattisgarh plant.
Work in Karnataka will also start soon. But on acquiring properties abroad nothing concrete has yet been announced.
True, given the competition, process of due diligence and also government approvals required howsoever much one wants there is going to be some wait before a deal matures.
One only wishes that among the numerous deals being talked of at least one should materialize sooner than later.
In fact the largest state-owned steel giant SAIL is way behind NMDC in terms of market capitalization — at Rs. 69,266 crore as on 25th March 2011. What makes NMDC a more sought after company than the likes of SAIL, TATA Steel et al?
The leadership is one factor. NMDC chief Rana Som is always on the look out for creating a future for his company. India's largest iron ore miner is now busy setting-up greenfield steel plants - in the resource rich states of Chhattisgarh and Karnataka. What is more in order to meet the possible need for coking coal — not available domestically — NMDC is now all set to acquire coking coal mines in British Columbia, a Canadian province apart from US and Russia.
At a trade event in Canada recently, the British Columbia government had invited Indian companies to invest in mining companies in the province. Both NMDC and Tata Steel had expressed interest in acquiring mines in the mineral rich region. For Tata Steel global acquisition has now become part of its existence. But to move in such a fast pace is something new for India's state-owned NMDC. The fast decision is what makes NMDC stand above others in India today.
NMDC chairman acknowledged the steps his company initiated, “We have discussed with geologists and also with the concerned minister for mines on the availability of coking coal properties in British Columbia. The province's officials had briefed us on picking up stake in coking coal mines there. But we are more interested in acquiring a mine and operating it rather than just picking up stake.”
According to the Canadian government website, British Columbia has over 20 billion tonnes of coal resource for surface or shallow underground mining. For coal bed methane exploration, the coal resource available upto a depth of 2,000 metres is over 250 billion tonnes.
Meanwhile NMDC has moved closer in its bid to acquire a coal mine in the US. The company is in talks with the promoters of mid-sized coking coal mines in Pittsburg and Alabama. It is in the process of completing the due diligence prior to making an offer. The Navratna PSU is making every effort to secure coal for its captive needs for the steel plants in Chhattisgarh and Karnataka.
CMD Som was candid, “We are keen to acquire good mining assets both in iron ore and coal. In iron ore, we would look at merchant sales. However, for coal we are interested in securing long-term linkages for our upcoming steel plants.”
Earlier NMDC was seen active in acquiring the coal mines of Russia's Kolmar Coal. It has now appointed Deloitte Touche Tohmatsu India Pvt Ltd as a financial adviser for the purchase of three coal mines of Kolmar. Market sources expect that the transaction will be completed by May this year.
Indian companies have been competing with leading Chinese coal miners such as China Shenhua Energy Co. Ltd and Yanzhou Coal Mining Co. Ltd for acquiring mining concessions overseas.
News reports that have appeared in the past have valued the three mines owned by Kolmar at $400 million.
Sources said the actual deal price may be different from the estimate. If NMDC does manage to buy the Kolmar mines, it would get a supply of one million tonne a year of mostly coking coal immediately.
Analysts said NMDC's attempts to buy an overseas mine was timely as coal shortages are projected to widen in future, but there might be risks involved in mining overseas. These properties are estimated to have reserves to the tune of 100-200 million tonnes. As per current valuations, a mine of such a size would be in the range of about $300-400 million, estimate industry analysts. Apart from bidding for Kolmar NMDC along wth two other companies had also submitted a $230-million non-binding bid to buy a 70% stake in an Australian mine owned by Perth-based Atlas Iron.
Clearly Som will leave no options untried. He is determined to take NMDC to a new level among India's state-owned companies.
Looking for properties to feed its plants is one part of Som's strategy, partnering strong allies is another. In December 2010, NMDC and Severstal agreed to build a steel plant for about $1 billion, the largest Russian investment in the metals sector. While the capacity of the plant will be two million tonnes, it is likely to be scaled up to five million tonnes later. The proposed plant will mainly make auto grade and electrical steel. Severstal itself has huge coking coal properties in the US.
The Karnataka joint venture is NMDC's second steel project. The first one with a capacity of three million tonnes is proposed to come up by 2014 at Chhattisgarh at an investment of Rs. 15,000 crore. The company is also in talks with Tata Steel to ink an equal joint venture for setting up a 2 million tonne per annum steel plant at Bastar in Chhattisgarh.
The volatile raw material prices seen during the last few years is a major concern for steelmakers globally. Coking coal and iron ore are the two key inputs for steel, accounting for more around 85% of the raw material cost. NMDC has rich iron ore assets but needs coking coal. Therefore to ensure raw material security for its upcoming steel plants in Chhattisgarh and Karnataka, Som is looking at acquiring coking coal mines. In fact the NMDC Chairman admitted that his company was close to buying two iron ore mines in Australia, while it was targeting three coking coal assets in Australia, Mozambique and Albania.
“We are targeting six assets, with primarily three iron ores and three for coal in Australia, Mozambique and Albania. We have already located and almost finalised acquisition of two iron ore assets,” Som had said.
NMDC accounts for 15% of the country's total iron ore production. It targeted to produce 30 million tonne of iron ore during the financial year 2010-11. It plans to invest Rs 3,309 crore on expansion projects in 2011-12, and a bulk of the amount will be spent on building the 3 million tonnes steel plant in Chhattisgarh.
Rs. 2,615 crore has been earmarked for NMDC's Chhattisgarh plant. Som said that “work on the Chhattisgarh plant is on full stream and it will be constructed on time. It will be the fastest developed steel plant in the country.”
Som knows what he must do is walk the talk. For last couple of years market speculation on NMDC acquiring assets abroad and setting up plants in India have been strong. NMDC has not denied such speculations. In fact the PSU has already initiated work on its Chhattisgarh plant.
Work in Karnataka will also start soon. But on acquiring properties abroad nothing concrete has yet been announced.
True, given the competition, process of due diligence and also government approvals required howsoever much one wants there is going to be some wait before a deal matures.
One only wishes that among the numerous deals being talked of at least one should materialize sooner than later.
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