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NMDC Spice puts Armenian mine buys on hold

Ishita Ayan Dutt  |  Kolkata 

In the wake of iron ore price crash, NMDC Spice International has put on hold its proposed acquisition of two iron ore mines in Armenia. NMDC Spice International is a proposed joint venture between state-owned miner NMDC and Spice Minerals and Metals, a part of the Spice Energy group.

NMDC Chairman and Managing Director Rana Som said the project has become unviable at current prices even though the price of the assets has dropped by around 50 per cent.

The two deposits identified for acquisition were of low grade iron ore magnetite, which needs to undergo benefication and pelletisation.

Industry sources said pellet prices are currently hovering around $70 a tonne, down from $240 a tonne a few months back. Prices have crashed across commodities. Recently, NMDC revised iron ore prices 25 per cent downwards mid-term.

Moreover, the benefication and pelletisation would require additional investment of around 30 per cent since the quality of ore required value addition. The two iron ore deposits have reserves of 300 million tonnes and 70 million tonnes. Earlier, the investments worked out for the development of mines was $500 million. However, even though the investment could now be lower, prices had made it unviable.

Som said the company is now conducting physical and chemical analysis but will wait for the markets to recover before they go ahead and acquire the mines.

NMDC plans to bring the pellets to India through the Poti port in Georgia on the Black Sea. However, tapping the Iran market through the road route was also being explored.

India has set a target of building capacity for production of 300 million tonnes of iron by 2020, which would require iron ore reserves of approximately 14 billion tonnes for over 30 years. India has proven reserves of 6.311 billion tonnes of total estimated reserves of 23.588 billion tonnes.

NMDC is a major supplier of iron ore to JSW Steel, Essar Steel, Ispat Industries in the private sector and Rashtriya Ispat Nigam in the public sector. NMDC produces 30 million tonnes of iron ore from its Bailadila mines in Chhattisgarh and Donimalai in Karnataka.

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First Published: Mon, December 08 2008. 00:00 IST
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