Q&A: Rana Som, CMD, NMDC

India’s largest iron ore producer, government-owned NMDC, is on the threshold of exponential growth, both organic and through acquisitions. Chairman and Managing Director Rana Som tells Ishita Ayan Dutt it’s all for sustainability. Edited excerpts:

NMDC appears to be pursuing quite a few global assets. What are the focus areas?
We are trying to acquire foreign assets very aggressively, not in the exclusive interest of my company, but also for the long-term raw material security of the country. We want to work in two areas, coking coal, the most critical input for the steel industry, and iron ore.

Doesn’t NMDC have enough iron ore?
We have 1.5 billion tonnes of reserves in the Bailadila deposit alone. Studies in the past four months, have added 611 million tonnes (mt). And, it is the best quality iron ore in the world. But if the (country’s) steel capacity increases to 200 mt, my own requirement will be 300 mt. Our existing mineable reserve is 6,800 mt, which will be exhausted in 25-30 years. No matter how much is explored, there is a definite elasticity limit.

What is the progress in your forward integration plans?
We will start work on our Chhattisgarh plant at the end of this year. For Karnataka, we want to bring in new technology and are talking to Nippon Steel.

Have you created a vehicle for acquisitions?
We have formed NMDC Global. Atul Bhatt is the executive director. I have asked them to keep their travel kits ready. Any time, they may have to travel to explore some global asset.

Have you zeroed in on the geographies?
Yes, one is Africa. It has some high-grade haematite ore. The other is Australia. However, a major part of Australia does not have high-grade iron ore.

Many companies are acquiring magnetite ore deposits. Why is NMDC focusing on haematite?
High-grade haematite is everyone’s demand. Global projections indicate that prices of pellet feed produced from magnetite ore will dip, while sinter feed from haematite will appreciate. We will acquire assets that have high margins.

You have projected 51 mt of iron ore by 2013-2014. Does it include acquisitions?
No, it will be from our existing mines.

Quarterly contracts for iron ore are now in practice. How is it working.
There could be a gap between the long-term contract price and spot price, which could be a deferred price. The entire global iron ore market is helplessly dependent on China. It’s not hygienic.

There some global forecasts suggesting the mechanism will not work.
It is difficult to work in the domestic market. We will have to watch the situation.