Captains Speak     

Published: April 15, 2024
Updated: April 15, 2024

NMDC

Exploring lithium assets In Africa, Australia

NMDC Ltd – formerly known as National Mineral Development Corporation — is an Indian PSU engaged in exploration of iron ore, copper rock phosphate, limestone, dolomite, gypsum, bentonite and coal. It is now exploring lithium assets in Africa and Australia. NMDC’s unit, Legacy Iron Ore, has signed a lithium exploration pact with Australia’s Hancock Prospecting Pty Ltd.

According to him, the realization came in at Rs 4,679 per tonne, higher by 22.3% YoY and 12.9% sequentially (aided by two price hikes taken in 3QFY24). The company has taken two further price hikes in 4QFY24TD (Rs 200/ Rs 250 for lumps/ fines on January 2, 2024 and Rs 400 for lumps/ fines on January 24, 2024). This would push the realization further in 4QFY24. Despite these hikes, currently NMDC’s prices are at a historically steep discount to global import parity iron ore prices.

He said January was the best ever month, the company did well in February, and prices have kept pace as there is a buoyancy in prices. Thus, the overall future scenario is pretty encouraging.

AWAITS CLEARANCES

Pointing out that going forward, the company has huge expansion plans in terms of both production growth and higher dispatches and distribution, Mr Mukherjee added that the management is committed to delivering unmatched performance. The company had earlier guided for around 47 million tonnes of volumes for the full year. The management is very confident that it will be very close to that volume. Whether it will touch 46-47 million tonnes or not is a question, but it will be very, very close to that. The company might exceed the target by a couple of tonnes or it may fail to reach it by a couple of tonnes. But it is targeting that figure even as environment clearance (EC) extension approvals for the Kumaraswamy mine are delayed.

Final clearance for the Kumaraswamy mine for a 2.28 mpta expansion can deliver an incremental 1 mt in FY24 if the management receives approvals soon. Referring to the capacity expansion programme, the CMD revealed that the FY24 capex guidance is Rs 1,750- 1,800 crore, of which the company has spent Rs 1,500 crore till January 24. The company plans to incur a capex of around Rs 2,100-2,200 crore for FY25. Over the next five years, the company plans to spend around Rs 30,000 crore (average of around Rs 5,000 crore per year) in capex. The company has an adequate cash balance (Rs 11,500 crore) to fund its capex. The management has guided FY25 production in the range of 50-51 mt, and then there will be capacity constraint for two years for any significant addition.

NMDC has applied for an environment clearance extension of 5mtpa at Deposits 14 and 11C. For a few of the deposits, NMDC has applied for 10% EC extensions, which the management expects to receive without a public hearing and with a 6-month timeframe. Other large-scale capacity additions planned are for the Kirandul and Bacheli complexes, for which EC extension has been applied for 30 mtpa each. The screening plant III with a 12 mtpa capacity is delayed. The slurry pipeline project is progressing well, except for hurdles faced in two villages. The pellet plant is being redesigned to a 6 mtpa capacity from 2 mtpa earlier. NMDC is doing a PFS along with Hancock at their magnetite and lithium deposits. The company has requested the government to grant approval for land acquisition through the Coal Bearing Act (CBA) route for coal blocks. Rohne is expected to be commissioned in 18-24 months. Doubling of the KK (Kirandul-Kothavalasa) railway line and the rapid wagon loading system (commenced already) is targeted for completion by FY24-end and would support higher volume deliveries.

The domestic demand for iron ore is expected to move in tandem with infrastructure and construction growth. NMDC, being the largest domestic iron ore miner, is expected to produce 45 mt of iron ore in FY24 (production for 11MFY24 has crossed 40.2 mt), surpassing production of over 40 mt for the third year in a row. It is well on track to exceed 50 mt of production in FY25E and 55 mt in FY26E, the domestic steel sector is well-placed compared with its global peers; and the domestic crude steel capacity is expected to reach 175 mt in FY24 with 82 per cent capacity utilisation.

This would translate to 282 mt of iron ore requirement in FY24E, with NMDC commanding a 16 per cent market share. "Similarly, as crude steel capacity inches up to 300 mt by FY30-31, total demand for iron ore would be $435-445 mt. We believe NMDC, with a dominant presence in the domestic market, is well placed to capitalise on the growth opportunities ahead.

MAJOR CLIENTS

According to Mr Mukherjee, during the nine months ended December 2023, the top three customers accounted for 70-72% of NMDC’s volumes. JSTL accounted for 38%, AM-NS accounted for 18% and RINL accounted for 15%. Cash balance at the end of December 2023 was Rs 11,500 crore, while CWIP stands at Rs 2,900 crore. The loss at the Panna diamond mine is Rs 50 crore for the nine months. Other points made by Mr. Mukherjee:

• NMDC Steel has already reached capacity utilisation of 45%. The company will be able to break even once it achieves a capacity utilisation rate of 65% (~5,000 tonnes / day) which the management expects to achieve by Q1FY25.
• The Australian gold mine has started mining activity and is currently doing waste mining (removing the top to reach the ore). So, within two months, the company will be able to generate cash flow from it.
• The company is redesigning its pellet plant, which will increase the capacity from 2 million tonnes to 6 million tonnes.