Brazil, US Mines Being Eyed by India’s NMDC

After it successfully bought a majority stake in Australia's Legacy Iron Ore in September, India's largest iron ore miner NMDC Ltd. pursues its aggressive expansion plans of acquiring overseas mines, this time eyeing companies in Brazil and the US.

In Brazil, NMDC Ltd. is holding discussions with Greystone Mineracao do Brasilfor and an unnamed coking coal mine in the US.

"Our scrutiny is on and little snags here and there are being sorted. In a few days there should be a decision on it," Rana Som, chairman and managing director of the state-run NMDC Ltd., said in livemint.com.

Both acquisitions plan for 100 per cent ownership of both companies to be funded through internal accruals, Som said. NMDC Ltd. will use its cash reserve of Rs19,000 crore for the purchases, livemint.com quoted another company executive as saying. NMDC Ltd. plans to make phased payments on the US coking coal mine.

NMDC Ltd. obtained a 50 per cent stake in Australia's Legacy, its first overseas procurement, for A$18.89 million. The acquisition surprised sceptics yet lauded by analysts and investors who knew that creating new mines at India are harder to develop and sustain given regulatory risks and struggles involving land acquisitions, displacement of locals and environmental clearances.

Output from Legacy will either be sold in the international market or brought to India but not until years of exploration and mine construction.

"It is okay if iron ore is produced after four to five years when the shortages hit us, but we want coking coal now," Som said. The US mine has an annual production of less than half a million tonnes.

NMDC mines less than 25 million tonnes of iron ore annually. It aims to increase up to 40 million tonnes by 2014-15, the reason for its aggressive overseas acquisitions.

India produces more than 200 million tonnes of iron ore a year and about 550 million tonnes of coal for its power, steel and cement plants. But supplies can not longer keep up with its rapid urbanization and growing population.

The country needs to import at least 100 million tonnes of coal by 2012 to feed its coal-fired plants.