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Extension of Chhattisgarh mining leases for 20 yrs to boost NMDC's topline

Analysts said that the extension of the leases was crucial for the company's survival as the Donimalai complex in Karnataka is not operational since the last year

T E Narasimhan  |  Chennai 

iron ore, NMDC
Representative image

Public sector miner will be closing 2020 on a cheerful note.

The government extended mining leases of the Bailadila iron ore projects of for 20 years, that is, upto September 2035.

The extension was crucial for the company’s survival. With this development, the company’s top line would increase by around Rs 2,500-Rs 3,000 crore, going by first half realisation, say experts.

The company’s stock closed at Rs 119.90, up 2.35 per cent on Wednesday.

Analyst said extension of leases is crucial for the company’s survival as the Donimalai complex in Karnataka is not operational since last year due to dispute over payment of premium to the state.

Of NMDC’s 33-million tonnes per annum (MTPA) production (total), Chhattisgarh’s two complexes in Bacheli and Kirandul, under the Bailadila projects, contributed about 24 MTPA in 2018-19.

In Chhattisgarh, of the five mines in the Bailadila sector, lease of four mines with an installed capacity of over 29 MTPA has been extended now and one mining lease had already been extended in 2017.

In 2018-19, the company’s overall production was around 33 million, including around 2.5 million tonne (during five months of the operational period) from Donimalai. The company stopped production due to the dispute and increased capacities from


expects to close 2019-20 with production of around 33-34 million tonnes and hopes to increase it to 34-35 million later, in spite of not having Donimalai.

If Donimalai comes in, there is an advantage of an additional 6 million tonne, and it would take the production to 40 million tonne.

Besides, there was a restriction on the Kumaraswamy iron ore mine, which is adjacent to Donimalai. Kumaraswamy could only produce seven million tonnes.

Now, NMDC has got Indian Bureau of Mines clearance to go up to 10 million tonnes of capacity in this mine.

Analyst said, with around 32.5 million tonne production, its turnover was around Rs 12,000 crore.

For 40 million tonnes, turnover will be growing to around Rs 15,000 crore at the prevailing rate during the first half of 2019-20.

In an another development, the Andhra Pradesh government has entered into a memorandum of understanding (MoU) with NMDC for supplying iron ore to the proposed Kadapa Steel Plant.

Recently, the state Cabinet approved a proposal to construct the Rs 18,000-crore steel plant, which is spread across 3,000 acres.

In another development, the coal ministry has allocated the Rohne Coal block to NMDC.

This will ensure coking coal requirements for the company's upcoming steal plant at Nagarnar in to some extent.

The company said this is an important step for raw material security for the steel plant. To some extent, it also reduces the need to import coking coal.

First Published: Wed, December 18 2019. 17:13 IST