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

Public sector miner NMDC will close 2020 on a cheerful note with the Chhattisgarh government, extending mining leases of NMDC Limited's Bailadila Iron Ore Projects for 20 years i.e. upto September 2035. The extension was crucial for the company's survival. With this development, the company's topline would increase by around Rs 2,500-3,000 crore, going by the realisation in the first half of the current fiscal, say experts.

Company's stock closed at Rs 119.90, up 2.35 per cent, on Wednesday.

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 due to a dispute over the payment of premium with the state.

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

In Chhattisgarh, out of the five mines in the Bailadila Sector, the lease of four mines with an installed capacity of over 29 MTPA has been extended. One mining lease was extended in 2017.

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

NMDC expects to close 2019-20 with production of around 33-34 million tonnes and is expected to increase it further to 34-35 million, despite no production from Donimalai.

If Donimalai comes in, an additional 6 million tonnes will be added, and it would take the production to 40 million tonnes.

Moreover, there was a restriction on the Kumaraswamy iron ore mine, which is adjacent to Donimalai, and could only produce 7 million tonnes. Now, NMDC has got a clearance from the Indian Bureau of Mines to go up to 10 million tonnes. Analysts said, at around 32.5 million tonne production, its turnover was around Rs 12,000 crore. For 40 million tonnes, that will grow to around Rs 15,000 crore in the next fiscal at prevailing rates during the first half of 2019-20.

In an another development, the government of Andhra Pradesh has entered into a Memorandum of Understanding (MoU) with the NMDC for supplying iron ore to the proposed Kadapa Steel Plant. Recently, the State cabinet approved a proposal for the construction of the Rs 18,000-crore steel plant. The plant, spread over 3,000 acres of land, is expected to come up in Jammalamadugu mandal of the district.